20VC: How to Build Anti-Fragile Venture Portfolios Today | Why Diversification is Overrated in Portfolio Construction | How to Think Through Sizing Investments, Market Sizing and Pricing in Today's Environment with Mike Chalfen @ Chalfen Ventures

Mike Chalfen is a solo GP with Chalfen Ventures and one of the most respected and successful early-stage investors in Europe over the last two decades. Among Mike's incredible portfolio includes the likes of King.com (makers of Candy Crush), Houzz, Tipalti, Snyk, and Tray.io, to name a few. Some incredible facts on Mike, he has a 15x career track record, he has a portfolio value of over $40BN+ and he joined the venture industry, the year of my birth! In Today's Episode with Mike Chalfen You Will Learn: 1.) Entry Into Venture and The Broken Customer Experience of VC: How did Mike make his original entry into venture way back in 1996? What does Mike mean when he speaks of the difference between "managing your career vs the money you invest"? What does Mike believe are some of the greatest challenges of venture partnerships today? What does Mike believe that the customer experience in venture partnerships for founders is broken today? How did seeing the prior booms and busts impact Mike's investing mentality today? 3.) Portfolio Construction 101: How does Mike think about portfolio construction today? With 9-10 core positions, why does Mike disagree with the traditional notion of "diversification"? How does the decision-making framework for Mike change when considering new investments vs re-investments? Does Mike believe that pro-rata is a lazy notion? What does Mike need to see on the upside to re-invest? How does Mike feel about the importance of temporal diversification? Why did Mike increase the cadence of his investing in 2021? Does he regret the increased speed? 3.) The Market 101: How does Mike think about the importance of market sizing? If we always underestimate the size of our winners, is this market sizing exercise not destined for failure? Why does Mike believe so many over the last few years have poorly sized markets they invested in? How does Mike assess market timing risk? What market risk is he willing vs not willing to take? What have been some of Mike's biggest mistakes when analyzing markets in the past? How did it change his perspective? 4.) Boards 101: How would Mike describe his style of board membership today? How has it changed over time? Why does Mike believe that boards at seed are not valuable? When do they become valuable? What is the single biggest mistake Mike sees so many young board members make today? What is his biggest advice to young board members? How does Mike advise founders on preparing for boards? What does he want to see? What are the biggest mistakes founders make when conducting board meetings? Items Mentioned in Today's Episode with Mike Chalfen: Mike's Favourite Books: Don't Let's Go to the Dogs Tonight: An African Childhood, Days Without End Mike's Most Recent Investment: Opply

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Harry Stebbings?

  This is 20VC with me, Harry Stebbings, and I couldn't be more excited for the show today. I have to admit, shows are always much more special when they're with close friends, advisors, and this person today has been one of the most wise mentors and brilliant friends to me in my journey. And so with that, I'm so thrilled to welcome Mike Chalfen, solo GP with Chalfen Ventures, and one of the most respected and successful early-stage investors in Europe over the last two decades. Among Mike's incredible portfolio includes the likes of King.com, makers of Candy Crush, Tipality, Sneak, and Trade.io, to name a few. Some incredible facts on Mike: he has a 15X career track record, he has a portfolio value of over $40 billion, and fun fact, and he's going to kill me for this one, he joined the venture industry on the year of my birth. This is an

• 0:43Harry Stebbings?

  absolute gem of a discussion, two great friends having an awesome chat on an industry we both love so much. I really hope you enjoy it. But before we dive into the show today, I want to talk about an incredible tool that I use every single day, Notion. Now, I am the worst for having 50 tabs open and constantly hopping between an endless array of tools. Do you feel me? Are you with me? Well, then Notion came into my life, providing one tool to do it all, with everything from seamless project management to easily organising 20VC's company information. A fascinating stat on Notion usage: more than 70% of companies who start using Notion stop using two plus other tools. And so Notion can even save you money, given how many other tools it can displace. Notion has a worldwide network of millions of users, creating templates, tutorials, and new

• 1:28Harry Stebbings?

  inspiration. The product's getting better and better every single day, and you always have the support you need. Learn more and get started for free at notion.soh. Take the first step toward an organised, happy team today, again at notion.soh. And speaking of foundational infrastructure like Notion there, Angel List has been a key partner for me in managing my investments. I just love using the Angel List platform, because it abstracts away all the complexity and operational burden of fund management. Whether you're running SPVs, a traditional venture fund like me, or a rolling fund, Angel List has you covered. I'm also super excited about their new product, Angel List Stack, which is purpose-built for founders. With Angel List Stack, you can create a fundraising-ready startup in just a few clicks. Angel List handles your company's incorporation.

• 2:10Harry Stebbings?

  Banking, cap table and fundraising process all in one single place. And this allows founders to focus on building. If you're a founder, you can launch your company at stack.angellist.com/20vc. Whether you are a founder or a funder, you're in great hands with Angel List. And finally, from websites and online stores to marketing tools and analytics. Squarespace is the all in one platform to build a beautiful online presence and run your business. There are three things for me that I just love about Squarespace. First, mobile optimized websites. All websites are optimized for mobile. Content automatically adjusts, so it just looks really beautiful on any device. Second, email campaigns. Squarespace makes it super easy to grow and engage your audience with Squarespace email campaigns. Say what, no other provider needed?

• 2:55Harry Stebbings?

  Amazing news. Finally, SEO tools. Squarespace takes the guesswork out of SEO, so you'll get found in search by more people more often. And if that wasn't good enough, go to Squarespace.com/20vc for a free trial. And when you're ready to launch, use the offer code 20vc to save 10% off your first purchase of a website or a domain. But that is enough from me, so now I'm so excited to hand over to my dear friend, Mike Chalfin.

• 3:26Speaker 01

  You have now arrived at your destination.

• 3:29Harry Stebbings?

  Mike, this is such a joy to do. I've wanted to do this one for about seven or eight years, but thank you so much for joining me today first.

• 3:36Speaker 02

  Thank you so much for having me, and I'm sorry that I didn't join when you first asked me. I'm a slow learner, but I eventually made it.

• 3:42Harry Stebbings?

  Listen, it was only my mother that actually listened back then, so I think it was a strategic wise move for you to do. And for those that actually can't see on TikTok, Mike has the most brilliant bookshelf behind him, which just shows how wise he is. But we're going to start today with Mike's intro. And so tell me, Mike, how did you make your way into the world of venture? And then how did you come to found Chalfen Ventures, obviously, most recently?

• 4:03Speaker 02

  Sure, I grew up quite nomadically. We moved around a lot and I was very interested in fairness and in how the world ought to be. Because wherever I went, I was a fish out of water and nothing seemed to be how it should be. So I did the obvious part to get into venture, which is I started studying civil rights history. And got a fellowship to the US to pursue more history. When I arrived, went to meet the guy I thought I'd study with, who said, I hate this career. I can't recommend it. I read your submission, you could spend your whole life doing that and I cannot recommend it. Good luck, I'm going on sabbatical. So off I went, ending up at BCG, which I didn't enjoy. And I left, much to everyone's surprise, at BCG to join a venture capital firm called Apex Partners, which was then a venture firm in nineteen ninety six.

• 4:46Speaker 02

  And Apex was an unusual place at the time, partly because there are only three firms in London that did VC. From the beginning, I had to sort of do all my own legals, do all my own numbers, write my own recommendations. And so it's very good training, in fact, for what I did later and do today. And although the funds got very big, you sort of learned the value of that every dollar counted. We didn't sort of walk away and just lose money casually, even though the funds were pretty big. But also, it peaked at, I think I was a thirty first and youngest partner, but it peaked at forty one partners. I learned quite a lot about big partnerships. And lastly, when I look back, I was managing my career rather than managing the money I was investing. And everyone else in the building below sort of the very top level was similar. That was something, again, I only realised much, much later.

• 5:28Speaker 02

  But it was, it was an unusual experience, really set me up well, both good and bad.

• 5:33Harry Stebbings?

  What do you mean by managing your career, not your investments? Just so I understand.

• 5:36Speaker 02

  If you're a mid-level person, if you were a mid-level person at Apex, you would do the right thing in order to look good, further your career, rather than optimise returns. Sometimes the two coalesced and overlapped, sometimes they didn't. For example, there were winners that I invested in in two thousand or nineteen ninety nine. And as this sort of upswing in the market happened a few years later, and I remember very distinctly suggesting that we reinvest in one of those businesses. So I don't know, eighty or ninety million euros was the valuation, I think. The answer was, no, we're really, we're past that, we've left that one behind, we've moved on. And that ended up as a one and a half billion euro outcome that Apex missed on because it's sold.

• 6:18Speaker 02

  I sort of didn't fight my corner, even though I had conviction, I just sort of went with it. As an example of managing my career rather than sticking to my guns.

• 6:25Harry Stebbings?

  Do you not find this a misalignment with GPs and LPs? We're just diving straight in. I much prefer a chat. Do you not find this misalignment with GPs and LPs today though, where I often speak to GPs and I'm like, this company is a fucking winner. Why are you shipping it to tier one multi-stage firm? And they go, Harry, when I tell my LPs that X did this company of ours, I look great. Well, I would like to have more ownership in that company and actually double down. But there is a misalignment there though.

• 6:51Speaker 02

  Yeah, I mean, I'm in a different position because I don't have a growth pool of capital by design. For me, the question for the company is what suits them best? Does a round with Chalfan Ventures piling in help them? What are the risks from their perspective? Rather than the sort of what's my incentive? It's like, what's best for the company is always the first question. And it may be, I'm having one discussion at the moment with a portfolio company where it may be actually the best thing is for me to price around and for the best possible co-lead to join and for us to crystallize that round. And that may be better than sort of a multi-stage fund investing too early, which we've seen quite a lot of.

• 7:25Harry Stebbings?

  Sorry, I interrupted and I do just want to get to the founding of Chalfan Ventures. So tell me, Chalfan Ventures, how did that come from Apex?

• 7:31Speaker 02

  The first thing was becoming an angel and Apex, the culture was focused on the business rather than the entrepreneur. And as an angel investing day one, even very small dollars as I did after I left. And it was one of these sort of fulcrum moments where I sort of went from focusing on the business to focusing on the entrepreneur and the business opportunity sort of together. That was a very important moment. When I thought about the lessons from Apex, I decided I wanted to go and be a partner at a smaller firm where I could have significant influence on the firm more. So I thought I joined a firm called Advent Venture Partners. It was hard to move different people in and out of the firm to create the best possible team.

• 8:11Speaker 02

  And so I left, did more angel investing, sort of more scale. And this is kind of an interesting period because without really hustling hard, I was finding very, very good opportunities, led some seed rounds personally. And I sort of realized that I didn't need to be at someone else's platform and instead formed Mosaic Ventures with a couple of people who I knew. And at the end of Fund One at Mosaic, I decided that I would really sort of prefer to work on my own at Chaff and Ventures. So that's what happened. I can sort of give you sort of more context. I mean, it's not actually about good and bad platforms. It's just what do you want to do and how do you want to express yourself? We're lucky, you and I, where we can sort of express ourselves in our work.

• 8:51Speaker 02

  And I think there's a Freud saying that sort of love and work are the cornerstones of our humanity. So for me, that's very true and you can really express yourself fully as a solo VC in a way that is a little harder as a partner in a firm and responsibilities to other people and building that firm. So that's sort of a big part of it. When I sort of go down a level, I wasn't great at building a firm. And actually, I think a lot of VCs are not good at building firms. I certainly decided I wasn't. There are people who are very good builders, they're operators, but they actually often join VCs because they don't want to operate. There are people who do say they want to operate, but most VCs don't. And those are the ones who are capable. If you take away all of those activities, I can devote a lot more time to what I think I am good at, which is working closely with entrepreneurs.

• 9:33Harry Stebbings?

  Why do you think most VCs aren't good at building firms?

• 9:36Speaker 02

  It's a very reflective role. You're sort of sitting back a lot of the time, deciding when to act and when not to act. I think it's quite hard to sort of combine being very, very good at that, very, very good at supporting companies and being a sort of operator with a plan who can lead large numbers of people or even a handful of people in one direction. So I think it's sort of a bit of a mix of characteristics. I think they don't always fit well with each other.

• 10:00Harry Stebbings?

  Mike, I love so many things about our relationship. I think one of the things I love is bluntly drawing on your wisdom and experience. So I want to start top down. We're going to move into Chaff and Ventures. I want to start bluntly on the correction that we're seeing now. It's quite unnerving for many younger people who haven't seen it before. Is the correction as bad as it seems? And how does it compare to prior crashes that you've seen?

• 10:22Speaker 02

  So as bad as it seems is obviously in the eye of the beholder, but I do think that it's a pretty serious correction. I think it feels worse in a way than 2000 did. The reflexivity in the market is just much faster. Stuff happens faster and that's because of information flow and the web, root cause. So it's hard to know whether it's worse or just things happen faster. So I think that's the first observation. Vied up a correction into financial and fundamental economics. Obviously, the two are related, but yes, errors come out of the valuations of risk assets, including tech. In two thousand, it was just tech and telecom that really had the air taken out of them. But the web businesses were very mature then. The cost of capital went way up and they didn't have stuff like EBIT.

• 11:06Speaker 02

  And we now know today that the best web businesses can generate enormous profits. So the losses then were a little higher, I think, for most of these essentially public startups, which is what they were than some of the businesses today. But there is definitely a sort of risk asset specific decline that we're getting today. And then what's, I think, harder to call compared to two thousand is it looks like there's significant economic headwinds beyond tech valuations, which obviously it's all interlinked with some of the causes of the depression of well, the retreat into tech valuations. But between war and inflation and supply chain instability and there's a lot to take. And it looks like there's going to be economic headwinds for a couple of years. And in two thousand, it was really a sort of hour corner of the market was suffering, but the wider world didn't suffer in quite the same way.

• 11:50Harry Stebbings?

  Having seen the prior busts in the way that you have and having lived through them as an investor, how does that impact how you think about investing today? And actually, F. Kurgan, a mutual friend of mine, said, how does that change how you deploy today?

• 12:04Speaker 02

  I think my reflection on the sort of early busts, good companies are still good companies, but it might just take longer and maybe more dilution for them to sort of come out the other side. I don't believe in sort of the fast payday. I've sort of mentally just don't count on timing. You can't time a winner. Secondly, and this is very fundamental, actually. So I had two great mentors at Apex, Barbara Manfree and Peter Englander. And Peter was my direct manager. And in two thousand and one, when we were sort of catching our breath and wondering what to do next, which portfolio companies to save, he said, the first question is, would you put a single dollar into each of these companies at a zero valuation? And what he was asking was, is this a fundamentally good business? Or were you just playing the market? Were you just playing the dot com boom?

• 12:48Speaker 02

  And that has always stayed with me and that definitely has affected how I invest and how I think of which businesses to invest. Not be fashionable, may not benefit from some of the sort of momentum in the wider market if there's a sort of bubble growing. But you know you're building real value. So that was a huge lesson. To answer Stefan's question on deployment, there are two different ways of deploying capitalists. First investments and follow-ons. So in first investments, I've definitely moved faster in 2021 than before. Sort of reverted to the mean, which for me is three or four investments in a year. But what I think I'm investing in hasn't changed.

• 13:25Harry Stebbings?

  Do you regret your increased pace of deployment in 21?

• 13:28Speaker 02

  No.

• 13:29Harry Stebbings?

  Why?

• 13:29Speaker 02

  I don't think that the proportion of mistakes was out of whack with a normal proportion of mistakes for me. So I still feel that there were some very, very good businesses that I backed. They cover still a range of different go-to-market motions, end markets that they sell to. And I don't think that any of them are selling to other businesses that are going to be significantly hit by current downturn. Any more than the rest of the market. I feel it's a sort of relatively robust crop that I happen to have picked relatively quickly. And then the other way of looking at it, by the way, is am I doing them a disservice by investing a little faster? And the answer is no, again, not really. I feel I'm sort of devoting the right time to the companies and to the entrepreneurs that I've promised my time and service to.

• 14:11Harry Stebbings?

  We think about this new generation of investors who are seeing this crash for the first time. How do you advise them? How do you talk to them in seeing this crash for the first time? And how do you solve their insecurity?

• 14:23Speaker 02

  If you probe carefully enough, most people were feeling insecure before the crash, but obviously it's come to the fore. Look, I enjoy mentoring. I had these live conversations I have. Sort of what I've been trying to communicate is you're not alone and that there's a big difference between being uncertain, which is completely natural. And in fact, it's built into the experience of being a VC. There's a difference between being uncertain and insecure or anxious. And you can embrace your uncertainty and actually that, if you face up to it, can reduce the level of anxiety. So that's the first point. The second point, I think, is that you need a framework. Everyone needs a framework. You need, but you need a framework to figure out which way is up, which companies am I going to spend time with and why? And again, if you create a framework that makes sense to you, everything else flows from that.

• 15:06Speaker 02

  And you no longer have to look at every single decision by itself and sort of be a first principles thinker every single time. Now, you'll still find that there are some situations that don't easily fit into the framework. And it's not a bad thing, it just means it's forcing you to acknowledge you might be about to make a decision, which goes against sort of what you set out as how you do things. And that may take a different level of conviction to break your own rule. But if you embrace uncertainty and you have a framework that allows you to sort of understand where each company fits in your world. And if you communicate early with your portfolio so that everyone's on the same page and understands the reasoning for that, then you're just systematically reducing the opportunity for excess anxiety as opposed to completely understandable uncertainty.

• 15:50Harry Stebbings?

  You said there about embracing uncertainty. I do want to ask, I had Keith Raboy on the show recently and he said his acid test for whether he's still a good VC is whether at least half of his friends laugh at all of his deals. Would you agree with that?

• 16:04Speaker 02

  Well, it depends what your strategy is. There are businesses that aim to take share in an existing market, often it's a more efficient service or whatever it may be. There are businesses that aim to create a new market. Sort of if you're the create a new market sort of end of things, then quite often it will appear to be completely strange. But I learned early in my career, any business opportunity where I or my partners thought was a very good service that they would definitely use, that was almost certainly addressing way too small a market opportunity. So really what Keith has discovered is that his friends don't represent a big enough market opportunity, probably true.

• 16:38Harry Stebbings?

  I do want to move to Chalfen Ventures and one kind of layer deeper. And when we chatted before, you said to me, Chalfen Ventures is the solution to a problem. What did you mean by this?

• 16:48Speaker 02

  There's two different things. One is that I think Frank Rotman from Q E D captured it about solo VCs, that we deliver quite a lot of bang for buck. We should deliver a lot of value compared to the dollars we invest. I think it's a product that entrepreneurs want and they know that by having someone like Chalfen Ventures, a firm like Chalfen Ventures involved, we're not going to try and dominate the cap table for the next three rounds. We're sort of giving them maximum advice and help and support now and then hopefully set them up for success. So that's the Sort of product, I think entrepreneurs would like. And then in terms of what it means financially, it means that I'm not trying to own 20% of every company. I'm not trying to dominate each round. Most entrepreneurs have a specific sort of set of goals for a given round, especially early stage.

• 17:32Speaker 02

  Like, what are the milestones they want to reach? Why are those the right milestones? How do we get there? And they ought to craft a syndicate around those goals. What's a syndicate that will support them in reaching those goals most effectively and efficiently? I may say, look, I'd love to be your only investor, and this is why you might pick me to do that. But there may be a better solution, which is a split round. Or you may decide that you just want me as a follower. Like, let's just talk about what your goals are and what the best round is as a result. And how does Chaff and Ventures fit into that becomes a derivative rather than the goal of the question. They know you're problem solving together from the beginning, which is how it should be. So quite frequently in the last year or two, I've issued term sheets to companies saying, I can underwrite the round or I want to invest at least X, which is typically half.

• 18:14Speaker 02

  So they've got a choice. And actually, what's come back is probably half and half. Where entrepreneurs wanted me to take the whole round and half the time they wish for me to share a round with a very different kind of investor. That's what I meant by that statement.

• 18:27Harry Stebbings?

  I always say to founders, actually, kind of construct your cap table like you would a sports team. And every person has to be world class at just one thing. I think people also try and solve for too many things in one person. But if you have five different people, actually, you can solve for many different things.

• 18:41Speaker 02

  Yeah. And actually, when you say five, it's interesting. So like, there's been this fashion of inviting lots of angels. And you really want to know exactly what each person is going to bring, whether it's a fund or an angel. You've got to sort of ask them, what will you do for me? As long as you know that, then it's great to have someone on the cap table. But I think, I suspect not every cap table is created like the team that you just described.

• 18:59Harry Stebbings?

  I always say it's lucky number seven. You have one lead, you have one smaller fund, and then you have five angels. And that's it. You have a WhatsApp group, and that's how you communicate. Ideal, I think. But changes according to different environments. I do want to discuss, well, many different elements, but I want to start on your picking. Mike, you have quite concentrated funds. How do you think about the right number of lines in the portfolio and the right level of diversification?

• 19:23Speaker 02

  So I agree with what Oren said on the show, but LPs don't need diversification, but they get it naturally in their portfolio. So it's really a question of what's the right construction for the fund. I was talking a little bit earlier about having a no real regrets about sort of what I'd invested in in 2021. And what I was saying was that there's the right mix of end markets, go to market vectors. You know, there's premium, there's small business SaaS, there's marketplaces, there's enterprise sales. There's a sort of range of go to markets. And I think what's important to me is that you sort of have a reasonably sort of anti-fragile portfolio construction. Not by virtue of having thirty or twenty or whatever number of investments, but by virtue of having different kinds of risks that you're taking with your investments.

• 20:08Harry Stebbings?

  What are those different kinds of risks? Is that different verticals? Is that different go to market motions? Is that different stage? Because there's many variants that it could be.

• 20:16Speaker 02

  Yeah, it's all of those things, less stage. It's also, however, how much capital's required to learn. That matters a lot. And it's also how many investments require a completely new market to emerge. You've got to have some investments where that's a question. You actually don't know if the market will emerge. You may have a hypothesis as to why and why now. And then some markets where you're attacking a large market, which has for some reason vulnerable or weak or lazy incumbents, or incumbents with incredibly high margins, which are beautiful to attack with tech businesses.

• 20:48Harry Stebbings?

  Brazilian banks, the worst. Tell me, how do you think about market timing? You mentioned that kind of you're going after new markets. How do you think about market timing? It's always one that I'm afraid to take risk on.

• 20:58Speaker 02

  I think the web is such an incredibly efficient discovery mechanism for needs that you can usually find some kind of indicator as to whether there's an unmet need that exists, even if it's not called a market yet, not coalesced into a kind of clear market. So I've got one company in stealth where its service hasn't been announced. It's sort of, you've got to really hunt it down to find it. And then you need to describe how you would use the service as a customer before they decide whether they can help you and want to engage with you on a sort of private one-to-one basis while they sort of build and perfect their product and they're onboarding and make sure they're adding value. And that business gets about 25 inbounds every day of businesses. That's an unmet need. There are ways of triangulating these unmet needs.

• 21:43Speaker 02

  I think if you're talking to yourself and you're persuading yourself that there's an unmet need, I would sort of catch that. Does that make sense?

• 21:50Harry Stebbings?

  Yeah, no, it totally does. Going back to the diversification, just so I know.

• 21:54Speaker 02

  Yeah.

• 21:54Harry Stebbings?

  Traditional venture portfolio theory suggests 25 to 30. For you, where do you sit in terms of number of lines that you feel comfortable with?

• 22:02Speaker 02

  Yeah, so it's nine or 10 investments in a fund, core investments.

• 22:05Harry Stebbings?

  Okay, so what does that look like on a capital concentration per company basis? I remember having Brian Singman on the show and he said the great line of capital concentration limits, the enemy of great returns. What does that look like?

• 22:16Speaker 02

  So like within the sort of day one to series A kind of bracket, day one, it might be a one to three million dollar first investment and a series A could be up to eight from my funds. So that's the first thing. The second thing is from a follow on perspective, how quickly can you learn whether to really concentrate on on one business? So I think you wouldn't want to get over, I don't know, 10% of the fund, 10, 11% of the fund with the first check. But if you can pick two businesses which you want to become 15 to 20% of the fund, then that's sort of a very positive outcome.

• 22:46Harry Stebbings?

  Can I ask, Mike, my biggest fuck ups in venture have always been, no, I'm not putting in more money. Have you seen the price on that? That's crazy. And I've missed the next round and the next round turned out to be cheap. How do you think about reserve allocation, reserves management really efficiently today? With all the years' experience that you've had?

• 23:03Speaker 02

  You've got to believe the new money is 10x money. And if it's not, then you need to understand whether in the portfolio you've got, whether a sort of more growth return of three or four X or whatever the number is, has a place in the portfolio.

• 23:17Harry Stebbings?

  Sorry, I'm interrupting you. I get you totally and I'm with you on the 10x, but it's not always that simple. And I'm a founder to you, my investor now. Mike, I need you to put in another million. It really signals a lot to the rest of the syndicate and it signals to new investors. Come on, you led the last round.

• 23:33Speaker 02

  Right, so it's very rare, right, so it's very rare that the answer is this is never going to be 10x. So it's about probability weighting. So I'm very unlikely not to contribute. I'm much more likely to put in an amount that suggests what I think the return. Opportunity is. The reality is that the fund sort of small solo VC, I'm not or I'm not expected to lead the next round or hope to lead the next round typically. So by sort of removing that possibility from my funds, by virtue of size, you know, they're sort of sub hundred million dollars. It's I'm under less pressure to invest a lot in the next round typically.

• 24:05Harry Stebbings?

  I'm just using this for advice now. What do you do when you lose trust in an entrepreneur or lose faith in their ability to execute? How do you communicate that? It's not like a relationship where you can walk away. You are.

• 24:17Speaker 02

  No, for sure.

• 24:17Harry Stebbings?

  What do you do?

• 24:18Speaker 02

  How I work generally with early stage entrepreneurs is we're in touch pretty frequently. We have typically a weekly or bi-weekly call and it's a standing call. And most of those calls are devoted to what is a problem that we're trying to address rather than updating it. So it's like thirty seconds, sixty seconds on quick update. Here's a problem we're trying to deal with. Both ways, there's openness as a result of just that cadence. The entrepreneurs are not constantly in sales mode. They're sharing and we're hopefully resolving problems together. So when a problem comes up, which is a performance problem by the founding team amongst the founding team. You sort of first of all need to start by saying this is a hard one. You acknowledge it's hard. You should say, look, here's some things I've learned. This is how I've learned it. Do we agree to start on that? So say, look, this is now it's a shared problem. It's a problem for the company.

• 25:03Speaker 02

  What's the best way to resolve it? And you rightly sort of present it as a shared problem and you need to sort of get well planned for the company.

• 25:11Harry Stebbings?

  I don't trust you anymore. How do you say that?

• 25:14Speaker 02

  You don't say I don't trust you anymore. You say this hasn't happened and that's a problem. It's just facts and you say it with empathy. You say this, I understand this is hard. And then you sort of make it there. It's a decision maybe that they need to take with their team about how to reallocate responsibilities or give them the support they need to perform better. But you sort of give them a window of time to resolve matters. And the answer is you've got to give people their dignity. So find a way to do that.

• 25:39Harry Stebbings?

  You said about feedback with empathy there and understand.

• 25:42Speaker 02

  Yeah.

• 25:43Harry Stebbings?

  Thing that strikes me there is parenthood actually, listening to you. Obviously, I know you have wonderful children. Did becoming a parent help you communicate with founders, be more patient? And how did becoming a parent? Change you as an investor.

• 25:57Speaker 02

  So actually quite a few things changed me, not just being a parent, but a lot of things fed into it. I think even more important than parenthood actually was just significant things going wrong in my life. So in a short ish period of time, unfortunately, you know, my, my father died very suddenly, quite young. There's this sort of dot com bastion, so do I had been the glory, you know, the, not the glorious internet kid, but you know, like the king of Apex internet. And that was all wonderful. And then it all kind of turned out I was a prince and it turned out I was the pauper. I got divorced and then dumped like Apex fired me, you know, it's not personal, it's just to a stage. Like you go through a period of time like that and you don't do things from a, a position of feeling like you're better than other people. Like life's a great leveler. What worries me in the venture business to a degree is people for whom nothing's ever really gone wrong.

• 26:42Speaker 02

  And life's been pretty easy. So I think going through those things that I described was incredibly impactful. And sort of my ability to start with the people in the room, feeling, understanding what they're feeling like, rather than just sort of analyzing a situation and telling them the answer, which is rarely the most effective path to communicating well.

• 26:59Harry Stebbings?

  I don't know how bad it is of me, but there are some questions that I would love to ask on the back of that. But it's like you mentioned prince to pauper and like being in the heyday of heydays.

• 27:10Speaker 02

  Yeah.

• 27:10Harry Stebbings?

  Apex, was ego management a problem for you? You were young and you were doing really, really well. Was ego management challenging? And how have you learnt to control ego over time?

• 27:21Speaker 02

  It was definitely a problem. There were very tiny differences between me and other people who were on the way up in the organisation. Those people felt their differences more than they, more than was appropriate. And I probably also did. So that created tension. I was dealing with more volume than anyone in the building had ever experienced. The dot com, the pace of company creation was pretty intense and you know, I was under a fair amount of pressure. I had two small kids, my marriage wasn't great. I was definitely not sort of optimally placed to have perspective on life at that time. It was definitely a problem. And what made a difference was actually one of the most experienced people in the business. It's actually an operator who became a very, very good investor, a telecom investor called John McMonigal. He's called me into his office and said, I just want to talk to you because I think you're very good, but if you continue as you are.

• 28:05Speaker 02

  That would be less important than whether we want you to stay here.

• 28:09Harry Stebbings?

  What did he mean by continue as you are in terms of the high volume, fast pace?

• 28:13Speaker 02

  No, in terms of behaviour with colleagues and it wasn't senior colleagues, it was sort of peers. He didn't say, look, this is a terrible threat. He's just saying, just calm down, just calm down. And it was very well taken.

• 28:24Harry Stebbings?

  Did you believe you were better than them? And the trouble is, and I'm asking this because I see a lot of the younger generation of VC at every fucking conference, at every event, at every dinner. I mostly, I've been successful, Mike, because I sit in one room and type and continue to type and then go to bed. But I look at him, I'm like, I do work harder and actually sometimes I do think I am better, which is wrong, but do you know what I mean?

• 28:48Speaker 02

  Well, you've put yourself in a position where you're the best person to what you are doing. In various ways that we could talk about if you wish, 20 minute VC is exactly what you should be doing, both as a media platform and as a fund. And whether I felt I was better than people, they felt they were better than me, which I'm sure happened a lot. Definitely a couple of people who were normally one or two years behind me at Apex said over drinks, you know, I just don't understand what you invest in. What's that? What's this? It's kind of crazy. So there's definitely two ways to treat. The question is not, am I better than you? The question is, given what I think I'm very good at, is this place the right place for me? And actually, a lot of the last few years at Apex, when Apex scaled and I ended up, I think, as the last remaining venture focused partner in what was becoming a growth and buyout and then a buyout shop.

• 29:31Speaker 02

  I was sort of isolated and I shouldn't have been there and it was right that I didn't get to stay and that I left. And the beauty of what you and I do is that we're doing exactly what we should be.

• 29:41Harry Stebbings?

  You mentioned leaving Apex there and Apex kind of firing you. So much of our identities are tied up in what we do. Did you find that challenging from an identity perspective? And how did you deal with that, Mike?

• 29:53Speaker 02

  It had been a long time coming just from a stage perspective, so it didn't feel unnatural. It was nevertheless pretty hard. We had the conversation, I think I was doing jury service. And I was perhaps uncharacteristically quiet that week, but I had a coach who kind of really helped me figure out that it was just a fit problem. It wasn't, there was something wrong with me. It's just there was a fit problem. What I was and what Apex was becoming was had become. Two very different things. So it was okay from an ego perspective, but it wasn't, it wasn't easy.

• 30:20Harry Stebbings?

  Yeah, I find so much of kind of what we do is tied up, our work identity is tied up in our personal identity. It's why I hate going on holiday because then I just don't know what to do or who I am. I do want to ask it, Mike, you know, when we think about kind of how you changed as an investor over like 20 years.

• 30:34Speaker 02

  Sure.

• 30:35Harry Stebbings?

  Have there been ones, two professional things that have changed the way you are as an investor? Often it can be the most painful or challenging catalyst.

• 30:43Speaker 02

  Yeah, I think that the dot com crash being faced with is what you have invested in actually a good business? That was very, very tricky. And as part of that, I remember turning down in fact, not one, but two entrepreneurs. These two companies that were competing, they decided the best idea was to combine. And it was two entrepreneurs who were good and would be complementary. And for the combination to happen, all that was going to take was for Apex to say, yes, we were put from a very large fund, from a 1.8 billion euro fund that we put a million euros in. And these two entrepreneurs were Mark Schuster from upfront now and a guy called Metin Negren, who I respected a lot. We said no, and that was my recommendation was not to put a dollar in. And it was a mistake in the sense that Mark built a business.

• 31:25Speaker 02

  And it was probably not a mistake in the sense that where we did concentrate capital ended up as bigger, more valuable businesses. That's a very hard discussion with entrepreneurs who were very good. So that was a sort of painful moment.

• 31:36Harry Stebbings?

  Did it change you? Like, did you change anything about the way you did this role?

• 31:40Speaker 02

  Yeah, it made me more upfront, like having gone through that. You know, there's a big difference between someone building a business and someone building a business you think you should put money in. And the most important thing was being very upfront about it. And it was a very sort of clear decision process and it was, it's very hard. And it wasn't even because I didn't think they were going to build a good business. It was just a business which fell below others where we wanted to concentrate capital at a time of scarcity.

• 32:02Harry Stebbings?

  Do you think VCs are upfront today?

• 32:04Speaker 02

  It's very, very hard because it's such a social business and there are referrals and people take blind references. And should I work with this person? And I think there's a lot of smiling and nodding. And it's just part of syndicates coming together quickly, part of rounds happening quickly sequentially become the companies. It may be that in the next year or two, we all are a bit more upfront because we kind of have to be.

• 32:25Harry Stebbings?

  I hope so. I've become a fan of the direct comms a lot more over the last few years.

• 32:29Speaker 02

  You've been very helpful to me in that respect too, so yeah, you are practicing what you preach.

• 32:32Harry Stebbings?

  Not at all. I wanna dig in on something in particular, which a lot of our mutual friends said, I mean, specifically Richard, Trey and Charlie. But it's plenty, when a lot of others pass, you dig deeper. So I just wanna understand really your mindset around what does it take for you to turn over another card? When others don't want to and will go, no, on first glance.

• 32:52Speaker 02

  So sort of diligence wise?

• 32:53Harry Stebbings?

  Yeah.

• 32:54Speaker 02

  So to me, the question is sort of, when something's not obvious, can I imagine how it could become very, very interesting and possibly dominant? Like so very different and possibly dominant. To me, that's always worth worth a look. I probably wouldn't take another look if it looks like it's the 10th business making Salesforce data all freely available to salespeople. I mean, or whatever it may be, where there's a low barrier to compete. But if I think that a business is genuinely has a different view of the world, ideally both in terms of its technology choices and the business outcome that's possible for customers, that's worth a look.

• 33:27Harry Stebbings?

  How do you think about outcome scenario planning? The big lesson I have from speaking to some of the best is you can never predict the size of your winners. In which case surely outcome scenario planning leads you to the wrong decision.

• 33:36Speaker 02

  Very acute question. I think that's true. However, I think that there are two different kinds of good businesses that broadly that we could invest in. One is a business that you just don't know how big it will be, but the economics are going to be very strong. And that's just kind of fundamentally different trajectory than a business which needs to be very big in order to have spectacular economics. The mistake in the last couple of years in our market has been a lot of businesses that could be good businesses at prices if they could be enormous businesses with unbelievable economics. So they've been mis-sized in terms of their cost base as a result, because they've been they've been overcapitalized, therefore mis-sized in terms of their cost base. And then we're in sort of a world of pain as investors and founders suffer as a result. Employees don't make the money they could have made if they'd have taken different decisions.

• 34:21Speaker 02

  So I think if we categorize those two right from the start accurately, that helps a lot in terms of not being over specific in terms of outcome planning. But you sort of say, I know that this is the sort of business which if it's doing well, I won't need to put endless amounts of money in and. If it doesn't become that big, it at least can compound very, very profitably. So an example is a winner for me from eleven, twelve years ago called The Foundry, which was making thirty five or forty percent margins when it was really not very big. And it didn't grow that fast, but it produced forty percent margin, thirty five, forty percent margins for ten years, growing at thirty, forty percent a year, requiring no capital. That's a sort of very interesting model. That's not a great investment necessarily for huge funds, but for most funds, that's actually, that's a really interesting model.

• 35:05Speaker 02

  Ideally, they're growing faster than that, the businesses, but that's sort of a different point. And then there are businesses which are real moonshots. The trick there is not getting sucked into imagining that they're sort of huge and ready to scale when they're not. And that's a way that the whole market, in my opinion, in the last two years, has sort of overfunded businesses as if they're ready to scale. And if only that money had been held back for a year or two, then maybe it would have been a great decision to capitalize them well. But unfortunately, we sort of, I think, as you said, foie gras of them.

• 35:34Harry Stebbings?

  I mean, at the core of both sides really is unit economics in terms of what builds a sustainable business or what doesn't. This is something where you've been incredibly strong. I do want to kind of double click on this because I don't think that our generation actually fully appreciates and understands unit econ to the extent that we should. How do you approach unit economics? When's the right time? Can you just walk me through your thinking around it?

• 35:54Speaker 02

  Sure. Good unit economics basically mean you can ultimately, at some point, choose to control your investment. What it means is that there's some size, whether it's ten or fifty or a hundred or whatever, million dollars of revenue, at which point the company could choose not to rely on capital to grow. That's the heart of it. So my view is poor unit economics mean you're always relying on the next investor and ultimately the greater fool. Now, most businesses, to your point, most businesses don't know if they have good unit economics at very early stages. But you can sort of imagine what good unit economics would look like for a given business. So if you have an enterprise software business, applied AI for a given process in the semiconductor industry,

• 36:37Speaker 02

  if it's addressing an acute pain for fabs, and if there are very few competitors to that business, even though it's got long sales cycles and after Sales, you need to prove that the technology delivers value to customers. You can imagine that once that's proven, really not very many times, the sales cycles and rollouts will happen relatively fast. So you can sort of imagine what good unit economics will look like for that business. I'm giving you a deliberately specific example that's sort of relatively obscure. But even with a type of business which the broader market doesn't sort of associate with good unit economics, you can imagine what good unit economics looks like for most businesses. And then you can assess whether the conditions required for those unit economics to obtain, whether those are really likely to emerge. Does that make sense?

• 37:22Speaker 02

  You're not looking for proof of unit economics, but you've got to imagine all the levers clicking into place so that good unit economics emerge over time.

• 37:29Harry Stebbings?

  I'm totally with you. I think in terms of predictability, it's much easier within enterprise. Your consumer's just over harriable. I do want to ask, has there been a time when you got it wrong? And why did you get it wrong? It could be either for the better or for the worse.

• 37:42Speaker 02

  I think businesses that start as services and the objective is to build out, you use the service process to build out software to automate. I've found that very hard to do. And so I've invested in businesses like that a couple of times in my career and just got that transition completely wrong.

• 37:58Harry Stebbings?

  Where do they fail in that transition? In terms of just productizing it entirely and then it just stays as a low margin services business?

• 38:03Speaker 02

  In enterprise in particular, a lot of larger businesses actually want services. Like there's a reason Workday and SAP have big services lines. Customers want the provider, the vendor, to really hold their hands and make sure that value is delivered. And that stickiness is an underlying reason why it might be hard to automate something, even if you wish to, even if you could, very hard to get away from that sort of client need.

• 38:27Harry Stebbings?

  I do want to touch on one final thing before we discuss boards and then do a quick fire. And it's FOMO. FOMO dictates so much of this industry. My question to you is, when we chatted before, you told me you do not have FOMO. Mike, how do you avoid it? And help me out here.

• 38:42Speaker 02

  Look, Chaff and Ventures is a solo VC, it's just me. And I don't want to have a lot of noise in the system. I don't want to be chasing every possible investment because I can't provide the service that I think is at the heart of my business. To the entrepreneurs that I work with. So it's a sort of business choice. It's a business model choice. If I didn't feel I could find differentiated, potentially large businesses that other people don't necessarily see, either at all or see as attractive when I invest, without seeing every possible investment, then I shouldn't be in the business. But I do feel like that. It's a sort of combination of a business model choice without which being a solo VC to think is just not possible. But also the sort of being content with my strategy and how I operate.

• 39:25Speaker 02

  If I wasn't content with it, then maybe I'd suffer from BOMO more often. But when I look back on my career, what I found interesting and maybe my partnership supported weekly or didn't support or invested in with my own money has been, on balance, pretty interesting. And so I'm sort of reasonably confident that what I see will produce stellar results. So I'm sort of at peace with that choice.

• 39:46Harry Stebbings?

  I wish I had your peace. I'm permanently paranoid, Michael. Yeah, I think it's good at this stage, actually. I think it's about being hyper competitive and hyper curious.

• 39:55Speaker 02

  But I think you've got to be competitive on the field you're choosing to play on. I'm not uncompetitive and I'm definitely not uncurious, but I'm happy with the trade offs I've made.

• 40:03Harry Stebbings?

  In terms of like, as you said, the trade offs you make there, you choose to do a board seat role often, which is a question now that a lot ask whether they do or don't. I've sat on boards before, might we sat on boards together? I don't think boards add much value, and I know that's a sweeping statement. How would you respond to do boards add value?

• 40:20Speaker 02

  Well, do they add value and do they add the right value at the right time? So my view is that at seed stage, a board is of limited value. The most value is weekly, bi-weekly, spending time with teams, helping them solve problems quickly so that they're not waiting for the board in order to say, by the way, I've got this problem. And the cadence of the board is often a sort of determines the cadence of reflection by the team. And so at seed stage, I think a board is negative. Even if it's a helpful board, the most valuable thing happens frequent cadence outside the board. And then when a board becomes more useful, partly perhaps because there are more investors involved, but mainly because a company's plan is clearer. I think too many boards are talking shops, but even good boards, I think are inefficient. So with a board, you want to clarify any factual questions upfront.

• 41:05Speaker 02

  Should come out early, factual questions clarified and then sort of agenda reprioritised according to what feedback is on what the big issues appear to be. Then you want to focus the discussion on those issues. It shouldn't be a reporting sort of forum. But I think that's one of the reasons why boards aren't very helpful is that they're misconceived as reporting forums. And you should really split apart facts and reporting from the strategic issues arising. That's where you should focus your time. And then a lot of boards, there are people who are sitting around the table very quietly and sometimes they're firm or they could be very helpful on a given issue. And I think that we don't always look around the table as a tribe. We don't always look around the table, VCs, to sort of determine who around the table is the best person to help with this one problem.

• 41:46Speaker 02

  Either because they know it or because they have a portfolio company who's particularly strong in this area or who had the problem and overcame it. And I think there's a lot of suboptimal sort of resource offers that result.

• 41:57Harry Stebbings?

  I'm intrigued. You sit on boards with very young people. What's the biggest mistake that you see young board members make?

• 42:03Speaker 02

  Not distinguishing between opinions, weakly held or strongly held, and not distinguishing between advice that they are in a good position to give or not in a good position to give. We should all, it's not just young investors, we all sort of slightly miscategorise that some of the time. I think being very clear when you've got a question and you've got an opinion and you've got advice, those are just three different sort of epistemological kind of categories.

• 42:24Harry Stebbings?

  Speaking of kind of the time allocation and where you focus your time, I think one thing that I do struggle with is the head and the heart of time allocation in venture, which is the head says spend your time with your winners, helping hire a head of sales, can move the needle for the company in your portfolio. And then the heart says, actually, it's really hard sometimes and you can't just abandon companies. How do you think about time concentration across the portfolio and do you have to concentrate time into winners?

• 42:49Speaker 02

  So you need to develop a good enough relationship. When companies mature, it's okay for them to spend less time with you and okay for them to pull you in when they need you. So I think the natural, people talk about rounds as sort of the natural demarcators of when an early investor may start to spend less time with a company. In my experience, it's actually not about the rounds, although it's related, it's more about the maturity of the team. So if you're a CEO and there's a co-founder and you don't really have a team, the relationship with the early investor is super important, but the more Competent people you have around you, the more you inherently bring decision making into the group. And you start to distinguish between stuff that happens inside the business and sort of working on the business. And the investor perspective is working on the business. In those early days, the two kind of really get mixed up. So I spend less time with winners because they don't need me because they have good teams.

• 43:34Speaker 02

  But when they come to me, the problem is usually a problem that I'm best suited to deal with and we can really go into it. And where you want to spend time because these are your winners and you want to feel like you're making a difference. That's not a good way for the company to get value from you. The company should basically determine when they want to talk to you. And actually, I'm going backwards now of the conversation, but by the way, with boards. What drives me mad is everyone's accruing the right to be on the boards round by round. One or two board members get added. That should be a statute of limitation. After three years, you no longer have the right to be on the board. Boom. And then if the team wants to invite you back, that's great. And it doesn't, and if you're an early investor, they may not exclude you for the next one. They may determine that actually the series A investors must not very helpful. So they want to lose that person, keep the seed investor. I mean, it should be up to the companies.

• 44:17Harry Stebbings?

  I totally agree.

• 44:18Speaker 02

  Sorry to sort of go back in the conversation, but I do have a bee in my bonnet about that one.

• 44:22Harry Stebbings?

  Not at all. The final question for a quick fire. I find it quite unfair sometimes for first time founders to know how to prepare for a board. As a board member, what do you want going into it? Do you want a 25 page deck? Do you want a one page, this is my three biggest questions? What do you want to come prepared to the board in an optimal way?

• 44:38Speaker 02

  It depends. So there are founders that are very good at saying, here are the two or three big problems right now. And this is why these are the big problems, even if numbers four, five or six may look important to you. And there are some founders that really aren't very good at that. I think setting the board agenda with the founder is kind of important. What we should discuss is direct result of the problems that they are encountering, although they can see coming over the hill. And I think most first time founders are not that good at anticipating something that will be a problem in three to six months. I think that's probably where you and I can be the most helpful in sort of asking, asking them to think that through. So that's probably where I would ask the most questions compared to the material I'm being supplied with.

• 45:15Harry Stebbings?

  Do you know what my biggest lesson is? The weight of words being uneven across boards. And what I mean by that is if you're on a board with Alfred Lin or Doug Leoni or Bill Gurley, or you name these. And then you comment in real time on a Google Doc. When they comment, it takes a very bold person to comment back, totally disagree with you, Alfred, on your views on liquidity within this marketplace. And so what I always suggest is like, comment in an isolated word doc, then you, the founder, can bring everyone's independent thoughts pure and then discuss them in the board together. And I find that the best level of discussion, actually.

• 45:48Speaker 02

  Yeah, it's then up to the entrepreneur to disagree with Alfred if that is the correct path. But I think an intellectually honest discussion is sort of saying, don't understand why you said that this is the most important point, Alfred, or this is why I disagree. And then you can, you can go at it.

• 46:00Harry Stebbings?

  I think they should. I think the biggest thing that worries me now is just like continuously asking for permission. It's like, you know, you do what is in the best interest of your shareholders because they trust you and they invest in you. But don't go and ask for permission to hire a head of finance, for Christ's sake. Anyway, I will get off my high horse. I want to do a quick fire round, Mike. So I say a short statement, you give me your immediate thoughts. Does that sound okay?

• 46:22Speaker 02

  Absolutely. Let's go.

• 46:23Harry Stebbings?

  So, I mean, you've got many books behind you. So what's your favorite book and why?

• 46:27Speaker 02

  So I like sort of fish out of water books, novels I'm talking about, where people go through conflict and they have to adapt and they learn about themselves. So they don't adapt and you see what results. Very, some very different examples. There's Days Without End by Sebastian Barry I love. Don't Let's Go to the Dogs Tonight by Alexandra Fuller, completely extraordinary memoir. I'm like Werner Herzog movies. I mean, it's all the same. There's a wide range, but that's kind of the theme.

• 46:50Harry Stebbings?

  Mike, I really just wanted you to say sapiens, okay? I just wanted sapiens and you give me this intellectual shit.

• 46:58Speaker 02

  Not intellectual shit. It's like, you should go and watch Werner Herzog. I'll send you Werner Herzog movies. It's visceral.

• 47:04Harry Stebbings?

  I would love that. I'll send you my favorite book as well. We can compare and contrast.

• 47:07Speaker 02

  Painting my numbers as well.

• 47:09Harry Stebbings?

  Yeah, it's dot to dot. Tell me, what's the biggest weakness of venture partnerships today?

• 47:14Speaker 02

  I'll give you two answers. There's entrepreneur's experience of them and then there's how they operate internally. So the entrepreneur's experience of them, it's the process. You meet someone, you explain your business, you then meet two people, you explain your business, then you might meet the partnership, you explain your business again. You've repeated yourself three times at this point. That's not a good customer experience. That's sort of one issue. I understand why it operates like that, but I don't think that's a great experience for the entrepreneur. And, you know, in the world of Loom and video, surely we can do better. And then I think the sort of venture partnerships solve for stability because it's such a long-term business and there are these sort of carry Cuffs that sort of vesting that encourage people to try and stick around. And I think that as a result, dissent is very, it's quite a big deal to have proper dissent. And I'm not sure that there are lots of different ways of dealing with that.

• 47:56Speaker 02

  And a lot of firms change their, for example, their voting processes and approval processes for investments. Quite frequently because, and they do that because the firms are evolving, but also no one's really got a good answer, properly a good answer for that. Actually, not they don't have a good answer, it's an enduringly good answer.

• 48:11Harry Stebbings?

  USVCs entering European seed deals, what are the thoughts and advice to founders?

• 48:16Speaker 02

  If seed is an intrinsic part of their business and they're prepared to get up early occasionally, rather than have every joint meeting start on West Coast time, I think it's completely fine. This is a remote first world, as long as this is, this investment is important to them, then go for it. I would be very happy to co-invest with a good USVC on most investments, I mean.

• 48:34Harry Stebbings?

  Now, I agree, Ed Simm at Bold Start is one of my favourites and I think he's one of yours too.

• 48:38Speaker 02

  He is.

• 48:39Harry Stebbings?

  Very pleased to hear that.

• 48:40Speaker 02

  Miami Ed.

• 48:41Harry Stebbings?

  Well, I know, he's very cool these days, isn't he?

• 48:43Speaker 02

  Very Miami.

• 48:44Harry Stebbings?

  Selling on the way up, what did you mean by this?

• 48:47Speaker 02

  It's two different things. And actually, a long time ago, there was an ABC, a Fred Wilson blog about this, about selling Twitter on the way up. We build a portfolio and if you can take money that looks like it's going to make another three X and put it into a 10 X opportunity that's earlier, that recycling is actively good. Now, you might get it wrong, it might turn out that you backed Twitter and it was a terrible mistake to have sold early, but you're backing your judgment about where in the portfolio will generate the most alpha today. So if you're not open to that because you're wedded to not selling because something is a current winner, then you're sort of not really looking at how to optimise returns in your portfolio as a whole, as opposed to for given asset. And we have different LPs and there are LPs that want money returns sometimes. And if you are looking at holding something fully, when there's a chance to get out,

• 49:31Speaker 02

  if it may be another three or four or five years before you can sell, then you need to look at not just what you think that company might make over the next year, but over the next five years and determine whether it's fundamentally dilutive to your performance to keep going or whether you should sell some of that stock. So my point is not that I want to sell, it's that you've got to sort of as a manager, these are decisions. And arguably, businesses where you are not prepared to. Logically, if not emotionally, you're a seller. So you just need to be open to examining these points in time as if they're decisions rather than, you know, a round is happening, I'm just going to sit back. Sometimes that's the right decision, but you need to be open to weighing it up. You're asking for a quick fire and I gave you a speech.

• 50:11Harry Stebbings?

  So I'm far from here. Pro rata is a lazy decision. It's in between neutral. For me, I either do it or I don't do it. Agree or disagree?

• 50:21Speaker 02

  I largely agree, but it's not every fund can lean in and do more than pro rata. Not every company has the capacity to bring in the investor they really want and allow us to invest more than pro rata. So it's a sort of useful artefact in the market. And there's, I think, a difference between what we can do and what we do do. What you've just said is theoretically true, but not very practical.

• 50:44Harry Stebbings?

  Good. Glad I have your wisdom and advice, Mike. Tell me, what do you know now that you wish you'd known at the start of your career in venture?

• 50:52Speaker 02

  I think basically a lot goes wrong, it'll be okay.

• 50:54Harry Stebbings?

  How do you deal with the really shit times, Mike?

• 50:57Speaker 02

  If you've done your best, there's really nothing else you can do. If you treat people well and with kindness in difficult times, that matters a lot. The biggest conflicts, I think, come when you're trying to hold too many different things in mind that are really not compatible with each other. And the quicker you admit that you've made a mistake, whether it's an investment decision or how you communicated with an entrepreneur, or when you prioritise work over family or vice versa. You've just got to be very, very honest with yourself and I think that removes a lot of tension and weight from difficult times.

• 51:28Harry Stebbings?

  What would you most like to change about the world of venture, Mike?

• 51:31Speaker 02

  I don't think there's enough mentorship. It's partly because as information flow has accelerated and grown exponentially, and as we see with your business, younger and younger people have incredible access to experience, precarious experience. There's a lot to read and absorb. I mean, young people today are so much better in the industry than when I was the equivalent age in the industry when I was starting. I mean, really, it's no contest. You know, when I started, we had an information department, the basement at APAC, so I had a fantastic woman, Jackie Me, who would help find a bit of information about a market if we needed it. And content pages. Reports are available on CD-ROMs. We faxed to her and we would decide if we wanted a chapter or the whole thing.

• 52:10Speaker 02

  I mean, there's so much information is available and yet I think that people going through the industry still need to talk and to bounce things off other people. I think that there's a, people need mentors, I think.

• 52:23Harry Stebbings?

  Listen, I

• 52:23Speaker 02

  You know so much. You've done almost four thousand, I think, of these shows and hopefully some of them were were interesting and useful to you. But when we meet, there's a lot to talk about.

• 52:31Harry Stebbings?

  Yeah, no, I mean, listen, I've been a beneficiary of

• 52:33Speaker 02

  I learned from you too. It's two ways.

• 52:34Harry Stebbings?

  I think that's the best mentorships, but no, I've been so lucky to have the mentors I have and I wouldn't have been able to get through, I think, honestly, the hardest times without. The good times, you can always do with advice, but I needed them in the bad times. I want to finish, Mike, the most recent publicly announced investment and why did you say yes and get so excited?

• 52:52Speaker 02

  Sure. The company is called Opely and Opely is creating on the face of it just an ingredients marketplace where small manufacturers of food brands or drinks brands source the ingredients they need to manufacture their products. But the team views it not just as how to enable commodities people can sell, but as a messy data problem and they believe that they can create the most transparent predictive supply chain. I love that because it's not just operating on one level, but on the level of sort of data and what that accumulated data with the right sort of analytics applied can enable. So that's very interesting to me. What excited me is not just that sort of multiple, playing on multiple levels,

• 53:32Speaker 02

  but the team is this young team of two people who are really yin and yang, Helen and Martin. And Helen's this raw intelligence drive capacity to get an enormous breadth of stuff done well is really remarkable. And then Martin's this completely different character who covers a lot of ground as well, but in a very different sort of different way. And it's just exciting watching them evolve and addressing this really very, very large sort of multi-trillion dollar opportunity.

• 53:57Harry Stebbings?

  Mike, as I said at the beginning, we first met like seven years ago. I remember our first meeting. I'm so thrilled that we made this happen. I can't thank you enough for joining me, for keeping it to 20 minutes. I'm so glad that we nailed that.

• 54:10Speaker 02

  I think one of my answers might have been less than 20 minutes, yeah.

• 54:13Harry Stebbings?

  But Mike, I loved it. So thank you so much.

• 54:15Speaker 02

  Thanks so much, Harry. I really enjoyed it and keep going. We will love the show.

• 54:21Harry Stebbings?

  I promise to keep the plaudits short, but the greatest joy for me from doing the show has been getting friends and mentors like Mike. He really is one of the most special people in this business. I can't thank him enough for all he's done for me, for always being there for me, for the wisdom. Mike, it really does mean the world to me and you've been such a great friend to me. However, before we leave you today, Notion. Now, I am the worst for having 50 tabs open and constantly hopping between an endless array of tools. Do you feel me? Are you with me? Well, then Notion came into my life, providing one tool to do it all. With everything from seamless project management to easily organising 20 VCs company information, a fascinating standard on Notion usage, more than 70% of companies who start using Notion stop using two plus other tools. And so Notion can even

• 55:03Harry Stebbings?

  save you money, given how many other tools it can displace. Notion has a worldwide network of millions of users, creating templates, tutorials and new inspiration. The product's getting better and better every single day, and you always have the support you need. Learn more and get started for free at notion.soh. Take the first step toward an organised, happy team today, again at notion.soh. And speaking of foundational infrastructure like Notion there, Angel List has been a key partner for me in managing my investments. I just love using the Angel List platform because it abstracts away all the complexity and operational burden of fund management. Whether you're running SPVs, a traditional venture fund like me, or a rolling fund, Angel List has you covered. I'm also super excited about their new product, Angel List Stack, which is purpose-built for founders.

• 55:47Harry Stebbings?

  With Angel List Stack, you can create a fundraising-ready startup in just a few clicks. Angel List handles your company's incorporation, banking, cap table and fundraising process, all in one single place. And this allows founders to focus on building. If you're a founder, you can launch your company at stack.angellist.com/20vc. Whether you are a founder or a funder, you're in great hands with Angel List. And finally, from websites and online stores to marketing tools and analytics, Squarespace is the all-in-one platform to build a beautiful online presence and run your business. There are three things for me that I just love about Squarespace. First, mobile-optimised websites. All websites are optimised for mobile. Content automatically adjusts, so it just looks really beautiful on any device. Second, email campaigns.

• 56:32Harry Stebbings?

  Squarespace makes it super easy to grow and engage your audience with Squarespace email campaigns. Say what, no other provider needed? Amazing news. Finally, SEO tools. Squarespace takes the guesswork out of SEO, so you'll get found in search by more people more often. And if that wasn't good enough, go to Squarespace.com/20vc for a free trial. And when you're ready to launch, use the offer code 20vc to save 10% off your first purchase of a website or a domain.

• 56:59Harry Stebbings?

  As always, I so appreciate all your support. I can't thank you enough for tuning in and I cannot wait to bring you an exceptional set of episodes next week with Matt Mullin Weg at WordPress on Monday.