Pod Insights The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch 20VC: Data Collective's Matt Ocko on Why "All Fund Size Models Are Wrong" and The Lifecycle of Current Venture Funds Is Inefficient? About this episode Matt Ocko is the Co-Managing Partner and Co-Founder @ Data Collective and has over 3 decades of experience as a tech entrepreneur and VC and has made investments in the likes of Facebook, Zynga, Uber and AngelList just to name a few. If that was not enough he is also an inventor on over 40 granted or in process patents. A truly deep thinker and one of my fave ever shows to record. In Today’s Episode with Matt You Will Learn: How Matt made his way into VC and came to co-found Data Collective? Why does Matt believe “All Fund Size Models are Wrong”. Does the current bifurcation of VC into angels/micro-VCs, small seed/A funds, big bruisers, and post-C/pre-IPO make for sub-optimal returns both on a societal and monetary perspective? What does the opportunity fund allow Data Collective? How do they use the initial fund to invest for insight in into companies at the earliest stages? How do they avoid the negative signalling risk that is normally ensued with an opportunity fund? How important is thesis driven venture firms? Does specialisation aid or hinder venture returns and why? How does Matt view the lifecycle of current venture? Matt has previously said it is inherently inefficient, why? Items Mentioned In Today’s Show: Matt’s Fave Blog and Newsletter: MIT Technology Review Matt’s Fave Book: The Way Things Work Matt’s Most Recent Investment: Tradeshift As always you can follow Harry, The Twenty Minute VC and Matt on Twitter here! Likewise, you can follow Harry on Snapchat here for mojito madness and all things 20VC. Eve make 1 perfect mattress - made with 3 layer technology and next generation memory foam. It comes packaged in a beautiful box and arrives the day after you order. You get 100 nights to try it with free return pick-up - it really is the perfect mattress for everyone. Just go online to evemattress.co.uk and enter the code 20VC for £50 off. Everybody deserves the perfect start with Eve.
Transcript 0:00 Speaker 00 Hello and welcome back to the 20 Minute VC with your host Harry Stebbings. You can find me on Snapchat at H Stebbings. And today's show really is an immensely special one for me. So for this show, we recorded the normal 20 minutes and then me and the guest got chatting afterwards and realised that there was so much great stuff, I just had to keep recording. And that recording resulted in an incredible discussion on the dark side of AI, which will be released in the coming weeks as part of our special AI feature week. So this will not be the last you hear from today's guest. Also, our guest today is an absolute machine. This was recorded at 1am his time, true dedication. So a big congratulations and thank you, Tim, on that one. So joining me for this very special show, I'm delighted to welcome Matt Ocko. Matt is the co-managing partner and co-founder at Data Collective.
0:44 Speaker 00 And he has over three decades of experience as a tech entrepreneur and VC, and has made investments in the likes of Facebook, Zynga, Uber and Angel List, just to name a few. And if that wasn't enough, he's also an inventor on over 40 granted or in-process patents, a truly deep thinker, and as I said, one of my favourite shows ever to record. But before we dive into the show with Matt today, every great day starts the night before. Every smart move you make on Wednesday has its roots in Tuesday. So leap out of bed with a can-do attitude and you've got a head start on the world. Eve makes only one kind of mattress, the very best. With three-layer next-generation memory foam and open-cell technology, they even give you 100 nights to trial it with free return pickup.
1:28 Speaker 00 So go to evemattress.co.uk and use the code 20VC, that's the 20 numbers VC, for £50 off and they'll be with you next day delivery, truly incredible. Everybody deserves a perfect start, even after a heavy night of mojito drinking with me. And speaking of heavy nights, it's now time to turn to our 1am interview with the main man, Matt Ocko at Data Collective.
1:55 Speaker 01 You have now arrived at your destination.
1:58 Speaker 00 Matt, so fantastic to have you on the 20 Minute VC. I've heard so much from John and Abraham's, so thank you so much for joining me today.
2:05 Speaker 02 I'm delighted to be here, Harry. You have a great show.
2:08 Speaker 00 Now, I'd love to get started, and thank you so much for that. But I'd love to get started with a little background on you, how you came to co-found Data Collective, and you and Zach really came together.
2:18 Speaker 02 It's actually kind of a funny story. We were both at a mutual friend's birthday party back, oh, I don't know, seven, eight years ago, a while now. It was in an underground, trendy bar, very loud electronica music. The beautiful people were having a great time, but neither Zach nor I, nor in fact our spouses, who were both there, do loud, and we all found ourselves in the quietest possible corner. And over the course of that loud trendy party, Zach and I ended up sort of talk yelling at each other about
3:00 Speaker 02 our deep compute and big data investment mutual thesis. Got to be really close friends after that, started investing together out of our family offices, out of our own money. And one thing led to another, and all of a sudden, we had a successful franchise.
3:19 Speaker 00 That has to be one of the best founding stories, founded due to electronica music.
3:24 Speaker 02 Somewhere, Skrillex is smiling.
3:26 Speaker 00 Yeah, exactly. But today, we're going to focus on a theme that I particularly love, obviously being a kind of interviewer, discussionist, whatever you'd like to call me, and that's contrarian thinking. So I want to start on a contrarian topic that I know you have some thoughts on, and that is fund sizes. And before you said that all fund size models are wrong, with kind of current bifurcation of VC into angels, micro VCs, small C to A funds, et cetera, et cetera. So why do you think this is suboptimal? First, from a returns perspective, and then let's do a societal. So why is this suboptimal from a return perspective?
4:02 Speaker 02 I sincerely believe, and there's a large but quiet group of other experienced VCs with successful track records, who also believe that the strict segregation of funds by size has an information destroying or signal reducing aspect. Today, the earliest investors in the company, whether they're the micro VC or small seed or A fund, who know the most about the company, have to basically hold a blind auction at each node or locus of capital formation as the company moves from stage to stage.
4:45 Speaker 02 What that means is that the later-stage funds, because the early investor has overwhelming need, along with the founders of the company, to complete the round, to essentially hold as fully populated and as aggressive an auction as possible. The later-stage investors are now competing with each other on as short a timeframe as the early investor can possibly make happen, which means their ability to do complete diligence and to have the most informed possible judgment is reduced. So that puts LP money in a later-stage fund at risk. In a hot environment, they're competing on the order of weeks.
5:30 Speaker 02 In a slow environment, for a credible deal, it's still a handful of months at the very most. Meanwhile, the early-stage investor, because they have to consider this capital formation risk, is at best unconsciously and at worst very consciously biasing the nature of the investments that they pick towards what is popular or acceptable or soothing to the to the late-stage investor. That's where the societal impact comes in. You may not be doing The most interesting, highest returning, most societally or industry transforming company
6:12 Speaker 02 if you're worried that you can't get it past a larger investor. The flip side of this sort of information or signal reducing aspect is that who knows better about the course or velocity of the early stage company than the early stage investor? Ideally, they've been going on customer calls, they've been watching whether management is highly functional or slightly dysfunctional, they've been seeing the evolution of the technology, they have a weather eye peeled for any competitors. I'll use the word advisedly, in a perverse sense, their adjudication of whether that company deserves another three million or five million or seven million dollars is at least as good, if not better than the next guy up the line, especially if that
6:57 Speaker 02 next guy up the line is by necessity deprived of the luxury of time for making a decision.
7:03 Speaker 00 You said there about early stage investors being predicated towards kind of favoring business models and startups which they know they can easily pass through to follow on funding. How do you extricate yourself from that kind of funnel process thinking and think outside of the box in terms of your investing thesis then?
7:23 Speaker 02 Well, you raise this question later and I don't want to steal your thunder, but that's one of the reasons that for many years now, we have had an opportunity fund. When we see a young company showing exponential progress, when we believe that it could be a potential monopoly or a member of an oligopoly and have appropriate impact and returns that goes along therewith, we want to have the freedom to back that company. It's also the reason that we made a very conscious decision from the very beginning of our first institutional fund not to be a micro VC, not to be in the thirty to fifty
8:05 Speaker 02 million dollar fund size category, because if you disagree with conventional wisdom about a series A. And you want to write two or three or five or even seven million dollars in a check yourselves to a company that you believe is extraordinary, you need to have the capacity to do that. Otherwise, you are perpetually a handmaiden to the enthusiasms or lack thereof of the folks upstream.
8:32 Speaker 00 So many questions to dive on there. One, two really in particular. One is kind of stage agnosticity. So let's start with that one, actually. Walk me through the thesis because you you make investments at seed, series A, and even later stage. So how do you think about portfolio construction? Are they segregated to opportunity fund and initial fund for each stage? How do you think about that?
8:54 Speaker 02 So so our opportunity fund is, in fact, contractually prohibited from chasing deals outside of our portfolio. So our opportunity fund is pure rocket fuel for things in our portfolio. That's number one. Number two, we voluntarily applied fairly strict limitations on valuation and and performance metrics. Even in our own portfolio, we're not chasing vaporous or Potemkin unicorns. Number three, there is an almost unitary LP position between our early funds and our opportunity funds. So there is de minimis conflict.
9:38 Speaker 02 Number four, from a portfolio formation perspective, we are investing as early as possible to achieve signal, to achieve informational advantage. We can invest, obviously not in conflicting companies, but in companies in the same space for across almost all interesting companies in a space, early for fewer dollars at risk than.
10:07 Speaker 02 One beefy late A or early B investment by a larger fund as those are traditionally done. And the ability to watch all of those teams in entire sector interact, pursue customers, develop their technology, recruit, deal with incipient competition, adopt innovation elsewhere as it happens, achieve product market fit and so on and so on and so on, gives us huge insights into not just which individual company is going to be a winner, but the entire sector as opposed to sort of blindly dumping money into a sector at increasing expense.
10:49 Speaker 02 If we've made a mistake, we're certainly not infallible. We can move out of the sector or move into an adjacent sector that looks like it will be more fruitful. As we go through this process, we are concentrating down on our winners so that in a hundred and fifty million dollar canonical early fund, we may have ten to fourteen positions that we've dubbed our core positions at most, which looks very much like a traditional venture capital portfolio. But we got there with a much greater degree of insight than has traditionally been possible.
11:27 Speaker 00 You said there about getting in really early and the signaling that that entails and allows you to see. How do you avoid then the negative signaling function of not following on with the availability of the opportunity fund? How does that work?
11:40 Speaker 02 Well, first of all, I don't think that our peers expect us to always follow on from the opportunity fund because sometimes companies do well enough that they don't need money from the opportunity fund or sometimes they're growing at a pace where traditional financing is sufficient. We'll get into this in terms of the life cycle of these deep tech companies across sort of the horizon of the vintage. And sometimes folks show up at our doorstep. We're friendly with almost everybody and co-invest quite happily up and down Sand Hill Road and say, look, XYZ company crossed our threshold. We've done some work.
12:24 Speaker 02 We really want to be the folks to write a twenty or twenty-five or thirty million dollar check. And since we've already achieved. Reasonable ownership upfront, there's no economic urgency to extract additional equity from the entrepreneur out of the opportunity fund just for the sake of doing so. So I don't think the opportunity fund carries any signaling risk. A fair question is the obverse, which is, is there signaling risk when you make a seed investment and then you don't follow on? I would say in our case, that is relatively minor. We are brutally frank with all parties, including the entrepreneurs and the folks upstream,
13:08 Speaker 02 about how we make an investment decision. Also, when we're not interested in following on, we're extremely transparent. And I think people understand that not every company is for us. By way of example, we were very early investors in a company called ZenPayroll.
13:28 Speaker 00 ZenPayroll, yeah, Josh Reeves.
13:30 Speaker 02 Right, Josh Reeves, phenomenal entrepreneur. Tomer London, his co-founder, is one of the best product and engineering people. We know, now renamed Gusto and thriving, we didn't follow on. We didn't raise our hand to be the big dog in successive rounds. And it had nothing to do with the quality of the company. And people trust us when we explain that because the company was a wonderfully engineered, great SaaS company delivering value to customers, but it was not a deep tech company. Our thesis, as the company grew, no longer applied to the company.
14:11 Speaker 02 Everybody who's invested in Gusto slash ZenPayroll at almost every stage so far is going to make a lot of money. We're grateful we had the chance to participate, but I think everybody also respects that we are relentless about our thesis.
14:25 Speaker 00 No, I mean, that itself is very interesting in terms of how important you feel that thesis-driven venture firms are. So let's do that a quick one there before we dive into fund cycles. How important do you think thesis-driven firms are? Do you think they need to be thesis-driven now instead of stage-driven?
14:42 Speaker 02 We're a little unusual in that we have a meta thesis through which we
14:49 Speaker 02 We view the world, but to your, to your point, we don't have an industry or sector thesis. Our meta thesis, the thing that we want to see in any company is that they are exemplifying the use of compute and novel, highly defensible algorithms to themselves be capital efficient, whether they involve hardware or not, so that they have longer runway, more bites on the apple, more control of their own destiny, and for their customers are capital efficient. So they deliver higher ROI, they have more control over margin, they can survive downturns
15:32 Speaker 02 that afflict every sector, and that they are doing so in a way that addresses ideally an unloved contrarian market, certainly a massive one. We've done stuff in computational biology, in agricultural genomics and informatics, and robotic automation, and also in fraud and risk reduction for some of the largest financial institutions in the world, as well as a company, Planet Labs, is delivering massive informatic advantage to its customers by virtue of having become the second or third
16:15 Speaker 02 largest space power in the world, measured in satellites. We're agnostic about sector, but how the company gets there, how they defend their edge, what their internal economics are, are incredibly important to us. We regretfully either say no upfront or don't follow on in the kind of companies that somebody like a Jason Lemkin is going to make a fortune.
16:38 Speaker 00 Yeah, good old Jason, we love Jason. But I want to, I want to finish then, you mentioned obviously capital efficiency and increasing life cycles of investments there. So I'm intrigued as to your thoughts on the life cycle of current venture. You've said before, probably contrarian thinking again, that you think it's potentially very wrong, the current fund life cycles. So what are your thoughts on this and the kind of inherent inefficiencies that currently persist in the industry?
17:05 Speaker 02 We gently tease our limited partners. They are by and large extremely patient, extremely farsighted people whose trust in us and whose generosity we are incredibly grateful for. But we tease them occasionally when, as Chris Dubos, one of our LPs, says, "Where's the moolah in the kula?" about mild cognitive dissonance between LP chest-beating over 20, 40, 70, 100-year time horizons, and also being anxious that they haven't gotten all of their money back inside three years. And again, our LPs are actually very, very good about this.
17:47 Speaker 02 But industry-wide, that sort of mental conflict is a real one. The fact is, in deep tech, in sustainable franchises, not consumer companies, not that consumer companies are bad, and we all may still be using Facebook in 100 years, but companies with 40, 50, 100-year durability, whether it's a GE, or an Intel, or a Qualcomm, which seems to be marching towards that, Cisco and Microsoft, which are getting very close to hitting those kind of durability milestones many, many decades, and tens of billions of dollars of value,
18:30 Speaker 02 those aren't fully realized inside a 10-year fund life, 12 at best with two petitions for one-year extensions by the manager to LPs. And with companies, especially the kind of deep-tech companies, and companies in general, whether it's Uber or Airbnb, running out the clock on an IPO as long as humanly possible, I think that the realization of maximum value from a successful investment and traditional fund lifetimes are beginning to invert. And as much as LPs like to talk about You know, perennial shakeouts in the ranks of managers.
19:14 Speaker 02 I think that some LPs who over time are uncomfortable with perhaps a 15 year or some of my VC colleagues have quietly mentioned maybe the equivalent of a 20 year long bond in venture, those LPs may not be the right ones to go forward in the early stage venture community.
19:35 Speaker 00 So that's what you'd like to see. You'd like to see an extension in VC fund lifecycle to allow for deep tech to really emerge as the dominance that it can be.
19:44 Speaker 02 We haven't done the final, final, final numbers, but we ask our companies, we measure our companies not by net promoter score, as one of our colleagues likes to talk about, but by how much actual revenue they're making across how many durable Fortune 1000 customers. These to us are the signs of a company marching towards premacy. In aggregate, in just a couple of our early stage funds, our companies have hard contracted GAAP bookings and/or fully recognized GAAP revenue approaching what should be about $2 billion in 2016. Do I sell positions in a panic to secondary funds?
20:29 Speaker 02 Do I turn off the lights because the company with $150 million of profitable GAAP revenue and a hard paid upfront bookings backlog of $600 million isn't quite ready to go be a victim of aggressive short hedge funds in the public market yet? I mean, I'm being a little snarky, but that's the kind of company that broadly speaking, I would like the freedom to see become an arm, you know, at least go public and/or exit for 25 or 30 billion US or whatever the currency adjusted outcome there was, or a Qualcomm
21:14 Speaker 02 or an Intel with market caps north of $100 billion.
21:18 Speaker 00 And I'd love to finish today on a quick fire round. I think you know the drill. I say a short statement and you hit me with your immediate thoughts. About 60 seconds per one. How does that sound?
21:28 Speaker 02 Knock yourself out.
21:30 Speaker 00 So your favourite book and why?
21:32 Speaker 02 My favourite book is a large volume called The Way Things Work, recently updated by the great architect illustrator David McCauley. I love it because it's inspired me since childhood and continues to do so by showing intimate details of a huge panoply of human innovation. It's like a history of of human genius all laid out in front of you. And I've loved sharing it with my kids. And on a rainy day, I'm always so happy to open it up.
22:05 Speaker 00 What are your productivity tips and tricks? You're a busy man. How do you stay on top of it all?
22:10 Speaker 02 Never sleep.
22:11 Speaker 00 This is a very good one. Okay, this was our next one. So how do you then respond to Arianna Huffington on the importance of sleep and of getting eight hours a night? How do you respond?
22:21 Speaker 02 I would, with a joking but ever so slightly sincere rejoinder, say that our returns speak in favour of my strategy and not hers.
22:33 Speaker 00 Do you think it's actually possible for founders who are all in on a startup to focus on getting eight hours' sleep a night? I've never met a founder who could do that.
22:42 Speaker 02 There are a handful of founders who are not only superhumanly brilliant, so they process and execute on information an order or more of magnitude faster than you and I. I'm happy to have a few of these founders in our portfolio. They also tend to be supremely disciplined people. I think of them as kind of early examples of homo superior from a science. And a lot of them, a lot of people in that tiny class do wonders and still get seven or eight hours of sleep. Some of the really scary ones are short sleepers and are that smart and that capable and that relentless
23:26 Speaker 02 and they sleep only four hours a night, which is really, really scary. I hope they give me a job as a pool boy when they take over the world.
23:35 Speaker 02 Ordinary humans like us can't respond to the demands of a true.
23:43 Speaker 02 Fully successful startup, one that has this hard, sharp arc of takeoff and sleep eight hours and cook our own organic breakfast and get in a brisk six mile walk and then write a little bit of poetry for the significant other before ambling off to work.
24:02 Speaker 00 Wouldn't I delight you. And then I want to touch on your favorite blog or newsletter. What are your must reads when they come in?
24:09 Speaker 02 Probably I rely on the synthesis that I get from Nuzzle, Jonathan Abrams, just fantastic information utility, you know, but I would say, you know, within that subset, there are probably a handful, Science and Nature, MIT Technology Review, the internal magazines of Carnegie Mellon and Stanford and Berkeley. I try to read as much as I humanly can because every now and then there's a little nugget there that either validates something that we're doing or says that we're being idiots and we need to change course.
24:49 Speaker 00 And then I want to finish today on your most recent public investment and why you said yes.
24:54 Speaker 02 So are you asking about a follow on or de novo?
24:58 Speaker 00 Let's do, let's do, I'll be, I'll be straight here and give you 30 seconds on a follow on and then a de novo.
25:05 Speaker 02 So follow on, three scan, because they are transforming both drug development and medicine by delivering a 3D map from the subcellular level all the way up to complete organ systems a thousand times faster and with essentially infinitely greater accuracy than human pathologists. So that's a, that's a follow on that we recently did. A de novo investment you might have seen is one called TradeShift, which is a company applying some very interesting machine learning techniques to massively reduce fraud and friction.
25:48 Speaker 02 In the global supply chain, they have almost a million discreet companies in a hundred and forty countries worldwide. Uh, from tiny companies in China up to a huge chunk of the Fortune one hundred addicted to their stuff. And they dwarf the footprint of Ariba and any other, you know, would be competitor. And the wonderful thing about them is no one except their adoring customers paying them a ton of money has ever heard of them.
26:18 Speaker 00 And you're you're right. I remember I had a Morton Lund who I was or is, I'm not sure when he was when I first spoke to him. Was the chairman at Trade Shift. Um, incredible company. Completely agree with you and massively under the radar.
26:30 Speaker 02 Well, you're you're speaking to your uh connectedness and expertise that you are one of about thirty seven people outside of their customer base that's uh.
26:43 Speaker 00 Well, Matt, it's been it's been great fun having you on the show today. It really has. I've so enjoyed it. Uh, and thank you so much for joining us.
26:49 Speaker 02 It's been uh my pleasure as well.
26:51 Speaker 00 But remember, that is not the last we'll be hearing from Matt as we have an incredible second part to this interview, which will be featured in our special AI week, which will discuss the dark and the light side of AI. But for now, Matt, we thank you. It's been incredible.
27:06 Speaker 00 Now, if you loved today's show and you'd like to stay in touch with us, you can follow me on Snapchat at H Stebbings with two Bs. And you can follow Matt on Twitter at Matt Oco. But before we leave you, stay, do not forget, every great day starts with the night before. Every smart move that you make on the Wednesday has its roots in the Tuesday. Leap out of bed with a can do attitude and you've got a head start on the world. Eve makes only one kind of mattress, the very best. With three-layer next-generation memory foam and open cell technology, they even give you one hundred nights to try it out and make sure it's perfect for you with a free return pickup. So go to eve mattress.co.uk and use the code twenty VC for a fantastic fifty pounds off.
27:46 Speaker 00 And it'll be with you in next day delivery. Absolutely fantastic. And everybody deserves that perfect start. As always, we so appreciate all your support for the show. You can always email me, harry at the twenty minute VC. I always love to hear your thoughts and feedback. And we look very forward to bringing you Wednesday's show with David Patman, where we discuss Venroc's investment in Dollar Shave Club and the acquisition itself. So stay tuned.
Previous 20VC: Turning Down Apple & Getting Funded By Chamath @ Social Capital with Dhananja Jayalath, Co-Founder & CEO @ Athos Next 20VC: Dollar Shave Club's Series A & B Lead Investor, David Pakman on The Requirements For A Successful Subscription Business & Why A Lot of Investors Do Not Like Consumer Page updated October 26, 2026 · transcript and summary are machine-generated
