20VC: David Tisch on Why Ownership in Venture Does Not Matter, His Biggest Investing Misses and Hits and How His Investing Style Changed as a Result & 3 Core Reasons VCs Pass That Do Not Make Sense

David Tisch is the Founder and Managing Partner @ Box Group, one of the leading seed focused firms of the last decade with a portfolio including Airtable, Glossier, PillPack, Plaid and many more. Prior to founding Box, David was Managing Director of Techstars New York and was a prolific angel investor making early angel investments in the likes of Vine and Warby Parker to name a few. In Today’s Episode with David Tisch You Will Learn: 1.) How David made his way into the world of tech and startups and came to change the state of seed funding in NYC with the founding of Box Group? 2.) Why does David believe that ownership requirements are "VCs projecting their problems on founders"? Why does David believe that ownership today fundamentally does not matter? How does David feel about his own relationship to price? Why is it important to be price aware across the portfolio, not on a per deal basis? 3.) What does David make of the rise of pre-emptive rounds? How does David advise portfolio founders who have them on the table? What other arguments does David use to founders contemplating taking seed rounds from multi-stage funds? How does David believe founders should assess their importance to the fund investing in them? 4.) How does David feel about his relationship to FOMO today? What have been some of his biggest misses in recent years? How have some of his biggest misses changed how he acts as an investor today? How have some of his biggest successes changed his investing lens? What changes did David and Box make to their decision-making process as a result? 5.) What does David believe are the biggest mistakes to turn down a company? Why is "too early" never a reason to turn down a company? How does David assess and think about market size today? Through what framework does David evaluate and assess competition today? What does David believe are some core concerns that are reasonable to turn down an opportunity? Item’s Mentioned In Today’s Episode with David Tisch David’s Most Recent Investment: Ramp As always you can follow Harry and The Twenty Minute VC on Twitter here!

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

• 0:00Harry Stebbings?

  This is 20 VC with me, Harry Stebbings. And if there's one element where the podcast is criticized for often, it's that I agree with the guest too much and that I do not push back enough on some ideas shared. Today, we completely tear that apart. The guest on the show is brilliant, but we have some very different opinions around portfolio construction. And so this is an awesome and very rare debate on 20 VC. And so with that, I want to welcome an old friend of 20 VCs to the show, David Tisch, founder and managing partner at Box Group, one of the leading seed-focused firms of the last decade, with a portfolio including the likes of Airtable, Glossier, PillPack, Plaid, and many more incredible companies. Prior to smashing the world of seed with Box, David was managing director of Techstars New York and was a prolific angel investor alongside it,

• 0:42Harry Stebbings?

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• 1:26Harry Stebbings?

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• 2:09Harry Stebbings?

  That is enough from me, though. So now I'm very, very excited to head into what is an incredible discussion with David Tish, founder of Box Group.

• 2:22Speaker 01

  You have now arrived at your destination.

• 2:25Harry Stebbings?

  David, it is such a joy to do this. I've wanted to do this one for a very long time, since our last episode, really, but thank you so much for joining me again today.

• 2:32Speaker 02

  Thanks for having me back. I've spent the past year trying to come up with new material to talk about with you, so we'll see how it goes.

• 2:38Harry Stebbings?

  Well, I'm sure we've got a lot to discuss, but for those that missed our first episode, like, tell me, how did you make your way into this very weird and wonderful world of venture? And what was that kind of founding moment for you with Box?

• 2:48Speaker 02

  I think you have to date yourself when you go back and tell a story and the world in 2010 or '09, when I started making early-stage technology investments, it's just so different. Venture capital isn't this word that gets talked about in school. People aren't aspiring to join our industry. Startups are still in the rebel phase of what people are doing to go against what normal is. And I think today, when you look at it, startups are taught in university, they're taught in grad school. There's hundreds of different programs that allow you to start companies. It's just a different era if you go back as little as 12 years ago. And so for me, it was just a love of technology, the internet specifically, more than it was technology.

• 3:30Speaker 02

  And watching at that time, pre-mobile, that the internet, sort of that moment that they call Web 2.0, starting, where it started to unlock a combination of two things. One is like better software for doing things online, connecting people was probably the biggest change, sort of the Facebook era. And the second was doing more things offline. So how do you use the internet to connect the world? And I think my head had always been oriented around falling in love with watching that happen from childhood days. That when I sort of figured out you could do this as a career, it was like, wow, this is what I should be doing. And so I started making a couple of investments. I ended up joining Techstars to help launch and run the New York program. And at that point, I had accidentally signed up to be an investor.

• 4:15Speaker 02

  And so Box Group became my way to invest into companies that were outside of the Techstars ecosystem. And nine years ago, left Techstars to do Box Group full-time. And so we've been doing it full-time for nine years and Box Group's been around for about 12 years.

• 4:29Harry Stebbings?

  I want to dive straight into a topic that I'm so passionate about, and I think we actually have quite different views on, so this will be quite fun. And it's portfolio construction. So how do you think about and how do you construct your portfolio today with Box?

• 4:42Speaker 02

  I think it's really important in what we do to not worry about projecting our own internal problems externally on founders. And so I'll get to your question directly, but I think indirectly, it starts there of I have a bunch of things I care about on my business side of the sort of coin. I don't think anybody needs to worry about those except me. And so when I meet a company, if I walk into that conversation saying, I need this much ownership, or this is what works for my model, suddenly I've taken my own shit and pushed it onto the company. So I don't want to do that. Instead, what I want to do is say, are you an amazing entrepreneur? Are you a founder

• 5:24Speaker 02

  that we would be excited to back for years to come? And if so, can I invest in your company? And at that point, we can figure out a deal that works for them, that works for us, without letting them know all the things that I need to worry about that they shouldn't care about.

• 5:38Harry Stebbings?

  I totally get you and I understand. I think that's a really nice way to look at it. But I also go, you've got over a hundred million in the new funds. You do have to put those elements front and center. And you also want to be respectful of people's time. And so if it's something that they can't accommodate, you don't want to waste their time on it. So I guess like, how do you think about that perspective with scaling fund sizes, which means?

• 5:59Speaker 02

  Right back at you, right? I have a hundred plus million dollars that I manage. I know what returns I have to make in order to succeed without much money. The founder doesn't need to care about that. I need to make sure that the founder is aligned to build a great company. And if they build a great company, I can figure out the math. I promise you, if we invest in unique outlier companies, our math works. Every VCs math works if you fund great companies. And so it's not about this like ownership threshold. If anybody owned 1% of Facebook, 1% of Uber, like 0.1% of Coinbase, your math works. Your math works really well and it scales.

• 6:36Harry Stebbings?

  I mean, it does and it doesn't, actually. If you're gonna be blunt.

• 6:39Speaker 02

  Why not?

• 6:40Harry Stebbings?

  If you're gonna be blunt with it, because if you own point one percent, you're looking at a hundred million back. And yeah, that is great, and I'm not belittling that. But if that is.

• 6:49Speaker 02

  But if you're telling me I managed a hundred million dollars and I got point one percent of Coinbase, which costs me, if I did it at the seed stage, fifty thousand. So if I snuck into Coinbase with a fifty K check and I got point one percent of the company, fully diluted at the end, and it's a hundred billion dollar outcome, and I get a hundred million dollars back, I've now paid for my fund on fifty K. I now need to return three X the fund, five X the fund, and guess what? I have another ninety nine point nine five million dollars to do that with. So now I need to make sure that I do a couple more of those unique outlier companies, and I still have a huge chunk of the fund to invest. So you're allocating capital in a concentrated way, saying, I'm gonna make a small set of bets.

• 7:31Speaker 02

  They're gonna have a lot of ownership, and I need some of those concentrated bets to work. I'm saying my job is to fund great companies, and if I fund great companies, my math will work, because it will work.

• 7:42Harry Stebbings?

  But then your model is predicated on having a hundred billion dollar companies. I find that difficult to steep, because we both know how rare they are, and we both know.

• 7:50Speaker 02

  But I said point one percent, right? And now if you get to one percent or two percent or three percent, you're not dependent upon a specific size of an outcome. You can still do the math in a way that gets you to a fund return. I'm confident that our math works. I'm okay with people from the outside not believing that our fund math works. That's cool.

• 8:08Harry Stebbings?

  So how many companies do you think you have in a portfolio? Say, Saka.

• 8:12Speaker 02

  We've been doing this a long time, and so I think today we have probably over three hundred active companies in the portfolio.

• 8:19Harry Stebbings?

  Okay, and so in each fund, you wanna have, say, fifty or sixty companies?

• 8:23Speaker 02

  More.

• 8:23Harry Stebbings?

  More.

• 8:24Speaker 02

  Yeah, there'll be eighty to a hundred companies in a fund.

• 8:26Harry Stebbings?

  Okay, so totally understand that. How do you find in terms of just like time and value add and where you spend your time with such a broad portfolio?

• 8:34Speaker 02

  My job is to satisfy a customer. A customer is the company. And so if we're not doing that, we won't be in business very long. We won't get access to the next investment because founders are going to ask founders who work with us if we do that well. And so my job is to do that well. Is there some magic? I don't know. Do you have a product?

• 8:54Harry Stebbings?

  The product is like us.

• 8:56Speaker 02

  Right. I call that a services business. I'm in the services business. My job is to service the entrepreneur. I need to make a customer happy. How do you make a customer happy? If you think about that analogy in any other context, every customer is different. And you need to walk into each relationship, understand who the customer is, understand what they're looking for and deliver them a great service. We do that. We do that at scale and we've done that for a long time.

• 9:20Harry Stebbings?

  One thing that I'm really interested in your thoughts here is like, we mentioned about not being so focused on ownership and not bringing kind of your shit to that conversation. I often hear managers say, I'm going to build ownership in my best companies over time. So I'll put in a 50K check, but it's just my foot in the door and then I can really double down. I didn't really buy that model because I think with your best companies, with the capital proliferation that we have today, you name the tier ones, they come in and they eat the ownership. Understandably, I'm not dissing them, but they eat the ownership and you can't build ownership.

• 9:50Speaker 02

  They're really good and they're doing what they should be doing, which is focusing on what they want out of this. Do I buy that every time? No. Do I think the only way to buy up in a company is to start by investing in the company? Yes. And the only way to buy up in a company is if you are worthwhile of the founder prioritizing you going forward. So do I think that like the blanket answer is write a 50K check, get on the cap table and buy up? No, because if you're not magical to that founder, they're never going to figure out how to create an opportunity for you to do that. And so what I think happens is if you are again satisfying the founder in a way that they believe that you are worth prioritizing, you can over time increase your amount that you're investing in a company.

• 10:34Speaker 02

  It's not going to happen in every company, but it definitely can happen. And in certain companies, I think when we look at our portfolio, some of our unique breakout companies happen to also be the founders that we've built an incredible set of relationships with. And so if we look at Ro, the men's health company that just raised a big growth round, we backed Zach Z in the pre-seed. We did that alone. We wrote a check in a round by ourselves. We've been backing that company from the pre-seed all the way up through this round. We have a relationship where Zach is going to create an opportunity for us to lean in over time. And if we look at historically, some of the best companies that we've been fortunate enough to work with, it nicely correlates with some of the best relationships that we have with our portfolio.

• 11:19Harry Stebbings?

  I totally agree with you in terms of the relationship driving, also the ability, as you said, to buy up in subsequent rounds. And when you have relationships like you do with Z, you absolutely can. So I completely agree with you there. Can I ask, I'm really nervous, honestly, say, David, when I see just generally pricing levels at our stage. Are you as nervous as me first?

• 11:36Speaker 02

  I mean, maybe, but I feel like the past 10 years in this bull market, every year the prices have been, quote, too high, and every year they'll keep going higher. And the outcomes keep scaling with them. We mentioned $100 billion. If I said $100 billion three, five years ago, it would be a joke. Yet today, there are a handful, not a lot, but a handful of companies that enter into a liquid public market at above $100 billion. That's not a private market overhyped valuation. That's now a public market with liquidity that you can actually trade in and out of a company. And so we've now escalated the outcome size that you're potentially looking at.

• 12:17Speaker 02

  It doesn't mean that that happens for every seed company for $30 million valuation, but it does say that the market, the TAM overall, that a lot of these companies are operating in, and the business models are being responded to throughout the entire investment stack in a uniquely more positive way than they were previously.

• 12:36Harry Stebbings?

  So how do you think about your own price sensitivity then? You must have turned down deals because of price at some points. How do you think about when to pay up versus when not to?

• 12:44Speaker 02

  I think it is important to be price aware on a portfolio basis and I don't think on a deal by deal basis. Price is a determinant of making a decision. Pretty simple. If you love a company and you want to invest and the deal is what the deal is, you make a decision to invest or not invest. I don't control price. The market controls price. Now, on a portfolio basis, right, if I look at a fund and I say our entry point is up 3X from our last fund, that's a problem. So I need to have some understanding of the portfolio price, but I don't need to have rigid discipline on a deal price.

• 13:22Harry Stebbings?

  Got you. Okay, that makes sense, especially when you think about it from the portfolio perspective. One thing that I'm sure we've both seen, and it's happened actually in companies we're both invested in, is the rise of preemptive rounds. How do you think about preemptive rounds today? And when advising founders who suddenly have a Series A of 20 million on the table three months after the seed and very little to prove for it, and they're going, should I take it? How do you advise founders on preemptive rounds?

• 13:47Speaker 02

  The word preemptive at some point is just sort of going to go away, right? If every round is a preemptive round, what does the word preemptive actually mean in that context? Which is, I think, what we're seeing happen in this market. And so the speed at which a company is going from C to A or A to B is escalated rapidly. Not every company, but it's a lot of companies. And you're seeing it proliferate in a much more significant way throughout the entire market. I think if I'm a company and I start a business, my aspirations are to make a great business. You are not going to build a great business off of a seed round. There are very few companies that can get to real scale off of a seed round. It happens, right? There's exceptions to every rule. Zapier did it and it's a magical company. Like, we can name a handful of them.

• 14:31Speaker 02

  So when you take the venture decision and you embark on that journey, you inevitably are going to raise another round if things go well. So I look at it like this. If I'm a company and a VC who's an adult and can make their own decisions offers me a round, I look at how much money would I want to raise when I want to raise that round? What valuation would I want to raise that money? And what person would I want to work with? I'm getting as much money as I want at a price that I want from a person that I want. It's a no brainer. You take the money.

• 15:00Harry Stebbings?

  And you don't worry about companies ability to scale into said valuation.

• 15:04Speaker 02

  That's their job. If they don't do that, they're going to fail. They're going to fail if they took that round or if they didn't take that round. If they don't execute, they need to be disciplined about how they spend that money to fill that valuation out. It's risky, but so is starting a company and so is taking on venture capital. And so is giving companies early scaled capital. It's all risky. So what are you trying to de-risk here? Which part? The last part only? I don't think that that's like de-risking anything. The risk is still inherent of like, if they build a successful company, every round will look cheap. If they don't build a successful company, it will look like a bad investment. It's pretty binary. There's like the fallback side of VC, right? Which is like, they didn't get all the way there, but they got somewhere and it was an okay exit.

• 15:49Speaker 02

  I don't think that's the dynamic of this industry that anyone is focused on. There are certain investors that might at the late stage, look at a different outcome size and a different outcome scale and invest around underwriting that risk. But I think when you look at the early stages, which today are seed A and probably into B, there is enormous amount of risk, but there's enormous amount of upside that is coupled with that risk.

• 16:12Harry Stebbings?

  So you said that, you know, if they execute, it'll be a great company. And if they don't, it won't be a great company anyway. And that's like the argument against signaling often. How do you feel about it when people say about signaling risk, especially with multi-stage funds doing seed investing?

• 16:25Speaker 02

  They've been doing seed investing for 12 years. Signaling risk is probably the most overrated soundbite. It's great. I use it, right? Every VC is going to use it when you're trying to figure out how to win your deal. But multi-stage investors are great seed investors. They've been great seed investors for a long time. Sequoia, Andreessen, Excel's been making early-stage investments throughout their entire history. Unit Square, like if you go back in time and look at some of their earliest investments, they're magical. I think if you look at all the multi-stage firms, their early investments have been very successful at points. It doesn't mean that their success rate is going to be higher, right? It means that they're going to still be making mistakes in terms of some.

• 17:04Speaker 02

  Companies they invest in, but in general, I think they're great investors. We work with everybody. We like working with everybody. We also like working with focused seed investors. I think they're equally interesting to work with. But I think that the myth of sort of you take a seed check from a multi-stage firm, especially in this market, that you're going to struggle to raise your next round. If that firm doesn't sort of write the term sheet, I think that's been proven to not be a material determinant of like success.

• 17:31Harry Stebbings?

  I find the most effective argument that really resonates was found as actually the price incentive misalignment when you have multi-stage funds in at seed. Because if we're seed stage focused firms like me and you both are, we're both aligned in terms of getting the best price for the next round. If you have a multi-stage firm in at the seed and suddenly they also want to lead the A, they're not aligned to you in terms of wanting to jack up the price.

• 17:52Speaker 02

  That's real. That's 100% real, but that's where you need to get external optionality and leverage in order to negotiate that. But that's a fully real thing. I think to me, what I look at is if I'm a founder, I want to be the top half of someone's portfolio from a capital allocation standpoint. I want to be what their average check or above is. So taking a smaller check is an option for that fund. Inherently, it's an option. So you just have to be aware that that's what you are if you're taking that smaller check. Instead, if I look at a fund and say, what's your average check size? Okay, your average check size is a $15 million check. So if I'm going to take a $3 million check from you, you know that you're in the bottom quartile of money allocated from that fund.

• 18:33Speaker 02

  So assuming that you're going to get this magical attention allocation from the fund is a mistake. If you are great, you will eventually get that magical attention allocation. But early on, it's the wrong sort of assumption. If you're in the top half of their financial allocation, you are going to be paid attention to.

• 18:50Harry Stebbings?

  Could I apply that to you and us and say that if you got a 50 to 100K check, you're going to get less attention than a 500 or a 750K check?

• 18:59Speaker 02

  Probably on some average out of the attention graph, yes. But I think if our intention is to write that first check in order to show that we're worthy of a bigger check, you might actually reverse that allocation. I think the multi-stage firms are more firm in their business. We're still playing with adorable money. I think that that's the challenge, right? Is that we're writing 50, 500 K checks. And when you look at a sort of multi-billion dollar firm, they think we're cute. I think we're very confident that what we're doing is interesting and very valuable. And I take every dollar that we invest seriously. But I'm also okay being sort of underestimated in this market.

• 19:36Harry Stebbings?

  Do you want to scale up, Matt? And obviously you've scaled.

• 19:38Speaker 02

  No, we're great. What we do is what we want to do. We've been doing it for 12 years. We don't want to do anything different. We love what we do.

• 19:44Harry Stebbings?

  So we're not going to see a 500 million box group fund?

• 19:47Speaker 02

  We believe our craft is early-stage investing. We want to be excellent at investing in seed, pre-seed. We'll dabble into series As. We don't want to lead seed rounds. We don't want to lead series A rounds. We want to be sort of second or third biggest check on a cap table. We want to do so in a collaborative nature. We want to do so in companies that we think are going to be great. And that's the business that we've built. We have a opportunity vehicle, which allows us to lean into some of our best investments. So I think when we think about scaling, that's our business. And we want to capitalize it in the best way to succeed at that business.

• 20:22Harry Stebbings?

  Do you find with the rise of micromanagers, that like second place position is being threatened? Where people have lead investors and then they have five micromanagers, your Jeff Morris juniors, your Todd and Rahul's of the world. And that second place check doesn't actually exist as often as it used to.

• 20:39Speaker 02

  I think every deal is different and you have to go into every company and figure out if you want to invest, figure out what the round dynamic looks like and figure out how to explain what you're selling and hopefully have the founders buy it.

• 20:49Harry Stebbings?

  Can I ask another thing? And I sound like really negative here. I'm like the old man of vendors.

• 20:53Speaker 02

  This is your, this is your aggressive interview tactic. I like it. Let's go.

• 20:56Harry Stebbings?

  The other thing that really concerns me is when we see like managers go through.

• 20:59Speaker 02

  I'm happy that you're concerned for me. I sleep okay at night. I panic about not investing in the next great company. I panic about missing something, but I don't panic about our business model. I think we're fine.

• 21:12Harry Stebbings?

  Another thing though that worries me, cadence of investing. People are going through funds in 12 months, 15 months. I remember, and this was not long ago, when it was three years. How do you think about deployment pace for you personally?

• 21:24Speaker 02

  I'd like to be on a two to three year fund cycle. Two and a half feels totally comfortable. Three feels fine. Two feels aggressive. I think anything ahead of that is not the business that I'm trying to build here. I want alignment. I said it to you, right? We're old. We've been around for 12 years doing this exact thing. We haven't changed what we do in 12 years. My intention is to do this for a lot more funds, many, many more years. And what that takes is a long-term perspective and not overreacting to a moment in time. We need to be in the market. We need to be live in the market and we need to be doing a great job, finding great companies and working with founders such that they want to work with us again and again, and that they tell all their friends that they should work with us. If we're doing that, we're going to build a great business.

• 22:07Speaker 02

  If we're not doing that, we will not have a new fund in two years or three years or one year.

• 22:12Harry Stebbings?

  You said you worry about kind of the missed opportunities element and ones that have slipped by. I totally share that. If there's like one that you think about.

• 22:19Speaker 02

  There's all of them. Every company that is good that we had a chance to invest in, they all haunt me. They don't haunt my partners. It's actually great because they're like very zen and they're very confident and we're going to do our best and sometimes we're going to miss. They haunt me all day.

• 22:34Harry Stebbings?

  So when I say missed opportunity, what's the first one that comes to mind?

• 22:37Speaker 02

  I don't know. We've missed so many companies. Like inherent in the seed business, if you're seeing a lot of things, is the idea that you're going to miss things and you're going to not get into things. You know, there's a company that we looked at called Stitch, which just raised a nice round. There's a company we looked at called Check, which just raised a nice round. And I think, you know, those are two that are more recently on the top of my mind where I'm like, you know, we were excited about those. I wish we had an opportunity to invest in them. I think our goal is to get into the companies that we want to invest in. And when that doesn't happen, I feel like we have to do a better job.

• 23:13Harry Stebbings?

  Have you ever changed what you do or the way you do it because of a miss or because of learnings from a miss?

• 23:20Speaker 02

  Yes, all the time. I see the problem set in our business. First is see a deal. Second is make the right decision. Do you want to invest or don't you want to invest? And the third is get in if you want to invest. The fourth is add value after the fact. Add value attaches to number one and three. If we're not adding value, we're not going to see the next set of deals and we're definitely not going to get in when we want to get in. Because founders are going to reference check us and figure out if they want to let us in or not. So the add value part is not part of the first three core problems. I obsess over seeing a deal. What I think is the hardest part to get right and articulate and talk about is number two is make the decision.

• 23:59Speaker 02

  That's the part that when we make the wrong decision, we spend a lot of time internally trying to figure out what did we miss? What could we have done better? Where did we lean into that we should not have over indexed in terms of our decision making process? And what was the process that led us to the wrong answer on that deal? And that goes the same for making a yes decision that doesn't work. Sometimes the answer is good decision, good try, ran a great experiment, didn't work. But sometimes it's we made a bad decision to invest, but I'm more obsessed with the ones that we saw and didn't say yes to that feel like we can get better at that.

• 24:36Harry Stebbings?

  Was there anything specific that you changed? So I made a mistake once when I over indexed on referencing specifically tied to their role in a prior company where they are an employee. And it turned out they just were shit employees, but fantastic leaders and they had opinions and they were bold. But that wasn't a great reference. And so I over indexed on a specific type of reference that led me to a bad decision. Is there anything like that which was specific?

• 25:00Speaker 02

  I think that's a great example, right? There are people who will be great founders and are terrible employees. And so I think we learned that lesson very early on, like just because you were a bad employee. I was a terrible employee. I would never hire myself as an employee, but it doesn't mean that I can't run my own business. It means that I was a bad employee and they're very decoupled. Yeah, I think valuations one that you talked about before, right? Don't pass on a deal because it's overpriced. If it's going to be a great company, that's the cheapest it will ever be. So you should probably. Invest. So that's one is don't pass on valuation. I think don't pass on something because it's early. That's something that we orient ourselves around all the time. Our job is to squint and see where it's going.

• 25:41Speaker 02

  And so the more you're focused on the present, the more you're going to miss the potential for the future. And it doesn't mean the future is going to happen for every company, but our job is to be imaginative and dream with the founder and join their journey to go fulfill that dream. And so the more that you're focused on the present, the less you're going to be able to squint and lean into the dream. And I think that that's something that we really try to orient ourselves around in the decision making process of like, well, if everything that they're pitching comes true, is this incredibly exciting? And then you come back to like, okay, do we think it's all going to come true? Do we think a lot of it's going to come true? And I think from a like mentality standpoint, that's how we try to approach decision making more so than we do with fact based decisions.

• 26:24Speaker 02

  Because if you're finding facts at the seed stage, you're going to be looking for facts all day.

• 26:28Harry Stebbings?

  The other thing that I've fucked up on before is when I've turned companies down consistently because of questions around market size, that has consistently led me to mistakes. I'm interested to hear if that's the same for you and how you think about market size as part of the decision making.

• 26:43Speaker 02

  Yeah. And you know what? If you pass on something because of market size and the company doesn't work, you were right. It was market size. It wasn't a big enough market. If you pass on something and it works and you pass because of market size, they have expanded and created the market that you thought was too small. So it goes back to dreaming. It's a huge issue, right? If you sort of assume that the present market is the status quo going forward, that's incorrect. If you assume that all the things that they're pitching are correct and they succeed at all those things, they're going to expand the market and the market is likely big enough. If you are great at a market, most markets are pretty big. They're not necessarily, again, supportive of a hundred billion dollar outcome. But if you're dominant in a market, no matter what it is,

• 27:26Speaker 02

  you can probably sustain a pretty scaled, exciting business. I think competitive landscape is different though, right? If there's a big enough market, but actually strong and too many competitors, figuring out the wedge into the market is a different lens of. The market question that I do think is equally relevant to market size. And you can't just say, okay, big market, we're going to be the 18th player in it. I think when you do see those companies, DoorDash is an example. We're going to be the 12th player in this market. The market is big enough for multiple players. But it didn't mean that just entering the market enables you to be a big outcome. They had to figure out their wedge. They had to figure out how to beat all the incumbents that were ahead of them at the time.

• 28:08Speaker 02

  And actually emerges number one in what is a crowded and competitive market.

• 28:12Harry Stebbings?

  One thing that's like becoming more and more prominent for seed managers, but also for founders. And so it's kind of a twofold question is the element of secondaries. Obviously with the proliferation of capital, again, secondaries for founders is more available than ever. How do you advise founders to think about secondaries when they're on the table?

• 28:27Speaker 02

  At different stages, I think there are different sort of thought process around it. Once the company is off the ground, the less a founder has to worry about their day to day life, the better. And if taking some money off the table enables their life to be easier to balance with their work. So they're not stressed about their living situation or they're not stressed about a life choice that they need to make to sort of sustain equilibrium outside of work. I view that as a positive thing. And sometimes that just means increase your salary and pay yourself enough that you're not sort of waking up, thinking about your short term income. I think as companies get to scale, it really is about a risk adjusted decision, right?

• 29:10Speaker 02

  Like I think you've seen historically that the founders who want to scale exponentially, keep putting their chips on the table. It doesn't mean that you can't take a couple off and create some balance in your life. So I think it really is a very personal decision and not something that is a generic piece of advice.

• 29:28Harry Stebbings?

  On the flip side of the table, you know, seed funds have the ability also to sell in terms of secondary transactions to much larger players in the later rounds.

• 29:36Speaker 02

  We don't sell.

• 29:36Harry Stebbings?

  You don't sell?

• 29:37Speaker 02

  We don't sell.

• 29:38Harry Stebbings?

  What about when a company goes public? How do you think about that, when to sell versus when to hold?

• 29:43Speaker 02

  Carefully.

• 29:45Harry Stebbings?

  You're adopting the quickfire round before the quickfire. But do you take like, you know, 30% off the table and ride the upside? Do you go?

• 29:53Speaker 02

  It's so, it's so specific, right? If you had sold Shopify when they went public, you left like a hundred X on the table. So don't sell Shopify if you own Shopify as a VC when they go public. That you missed the actual bigger set of upside in that company. So it really comes down to each company and sort of understanding, again, this like risk adjusted decision.

• 30:14Harry Stebbings?

  Final one for the quickfire. And it's the element of mental plasticity. You know, you've had many successes, also naturally there's companies that haven't worked. How do you bring a fresh mindset to every opportunity? When your mind is inherently tainted by successes and failures. So how do you prevent the past impacting future decision making?

• 30:32Speaker 02

  You have to wake up excited to do this job every day, knowing that the next company you see is potentially the next great investment that you're able to make and the next great founder that you're lucky enough to meet. And if you don't wake up every day with that renewed excitement to do this job, it's tiring and it's repetitive. We are fortunate enough to meet and see a lot of great founders every year. And I need to actually find joy in that exercise, knowing that I've been doing that exercise year after year. And so I tend to look at every company with the lens of like, how do we invest in this? Like, we probably should invest in this, right? It's probably interesting. And then sometimes you meet a company, you're like, it's not interesting. I should not invest in this, but I'm not a natural optimist, I don't think.

• 31:15Speaker 02

  But I have an incredibly optimistic mindset in terms of what we do every day. Our job is to find the long-term unique outliers and that has to come through dreaming alongside the founders.

• 31:27Harry Stebbings?

  Really, last one, I promise, before the quickfire. A decision-making process internally for you. Some have, you know, unanimity required, others have, you know, one person pounding the table. What's the decision-making process for you?

• 31:39Speaker 02

  I have a great team. My partners, Nimi, Adam, Greg, Adina and Claire, we love working together and our job is to make each other better. And I think in decision-making, that applies more so than anything. We work together because we trust each other. We trust that each of us understands what the job is. And sort of our business work is to make great decisions. And so as I look at our decision making process, we call it advocacy driven. My partner Nimi came up with the term. It's a nice set of buzzwords put together, but what it means is in a given deal, somebody has to want to do the deal. And our job is to help that person get to their conviction as best as we can. And so what is it that we can do to help them do better with how they're thinking about it? You know, sometimes the advocates are three or four or five of us where it's like, oh, we should definitely invest in that company.

• 32:23Speaker 02

  But sometimes it's just one person and our job is to help that person get to a good decision.

• 32:28Harry Stebbings?

  I do want to move into the quick Friday because I could chat to you all day, David. So I say a short statement. You give me your immediate thoughts. That sound okay?

• 32:34Speaker 02

  I think we can do that.

• 32:36Harry Stebbings?

  Let's do it. Okay. So what's the must watch Netflix right now for you, David?

• 32:39Speaker 02

  I have three little kids and I'm trying to teach my kids through different ways. And what I've gotten them into is Planet Earth and Blue Planet and all the sort of David Attenberg narrated documentaries. And rewatching those under the sort of eyes of a five year old is probably the coolest thing I've done in a long time.

• 32:55Harry Stebbings?

  I love them too. So that's great to hear. What do you know now that you wish you'd known when you started Box?

• 33:00Speaker 02

  What do I know now? Not a lot. And that's actually the answer is that you are inherently living in uncertainty in this position as a job. You are every day only as good as yesterday, but the only results you know are the results from 10 years ago. So I can't live off of my 10 year old decisions, but that's the only actual feedback loop I have. And I'm only as good as I was today and yesterday. So you have to be comfortable with uncertainty.

• 33:25Harry Stebbings?

  What's your biggest advice to angels starting investing today?

• 33:28Speaker 02

  Invest. Investors invest, right? Like you're not going to outsmart the room. You're not going to outsmart sort of a deal. You're not this magical reason why a company is going to succeed or fail. If you like something, invest in it.

• 33:41Harry Stebbings?

  What three traits would you most want your children to adopt?

• 33:44Speaker 02

  Empathy, kindness and determination.

• 33:47Harry Stebbings?

  What's the hardest challenge for you today with Box?

• 33:50Speaker 02

  I think our challenge is every day, the same challenge, which it was 10 years ago, which is find the next great company and be fortunate enough to invest in it.

• 33:59Harry Stebbings?

  Who's the best board member that you've seen in action and why?

• 34:02Speaker 02

  We don't sit on boards.

• 34:03Harry Stebbings?

  What about the companies that you've been invested in though, and they've been like super impactful board members? Have you seen those?

• 34:09Speaker 02

  I think it's incredible when a company is able to get a total outsider who is unique in their perspective to join the board and bring a non-investor lens, an operator lens, a sort of external experience lens to a company. I think that could really help.

• 34:24Harry Stebbings?

  And then final one, what's the most recent publicly announced investment and why did you say yes and get so excited?

• 34:29Speaker 02

  Today, Ramp announced a pretty big round. Ramp is a company that we've been fortunate enough to invest in since the seed round. This is a second time entrepreneur team. They sold their first company to Capital One. They came out determined. They knew exactly what they were going to build, sort of the quality of what they were going to build and sort of the way they were going to go build the company. And they are executing in a world-class way. I think the product sort of just jumps out to you. So that's one. And then there's another company that we invested in that hasn't announced yet, but it's called Catch. It's a sort of payment product. It's going to be live pretty soon and it's one worth keeping an eye on.

• 35:04Harry Stebbings?

  David, I always love chatting to you. I can't thank you enough for putting up with my protruding.

• 35:08Speaker 02

  I like the aggressive Harry. I think we should do this again. I'm all for it.

• 35:12Harry Stebbings?

  It was a bit more aggressive, huh?

• 35:14Speaker 02

  Yeah, it's good.

• 35:17Harry Stebbings?

  Well, I mean, there you go. At least you know now that I do have opinions and I don't just agree with everyone. Tell me what you think though of the more opinionated Harry. I'd love to hear your thoughts and feedback. You can email me, [email protected], Instagram, HStubbings1996 with two Bs. Always love to see you there. But before we leave you today, did you know that more than 80% of US public stock is owned by just 10% of Americans? This divide is even greater in the private markets. Carter makes it as easy to issue equity to your employees as it is to issue payroll. And for employees, as easy to accept it too. More than 16,000 companies issue equity to their employees through Carter. Whether you're just getting started or getting ready to go public, the team at Carter can help. Check them out at carter.com.

• 36:00Harry Stebbings?

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• 36:43Harry Stebbings?

  and manage funds, make investments and handle the myriad of issues that arise throughout a fund's lifetime. So to learn more about the number one most active law firm representing VC-backed companies going public, head over to Cooley.com and also check out CooleyGo.com. As always, I so appreciate all your support and I can't wait to bring you some phenomenal episodes.