20VC: Mike Lazerow on Why How You Operate As a VC Is More Important Than Who You Are and What You Have Done, Why Boards Are More Important for the Entrepreneur than Investor & How The Best Entrepreneurs Prep Their Boards & Extract Value From Them

Mike Lazerow is a serial entrepreneur and now Co-Founder and Managing Partner @ Velvet Sea Ventures alongside his wife, Kass. Prior investments from the Velvet Sea Partners include Twitter, Square, SpaceX, Snap Inc., Facebook, Pinterest, Domo, and more. Prior to becoming an investor, Mike founded Buddy Media in 2007, selling the company to Salesforce just 5 years later for $745M. Before Buddy Media, Mike co-founded Golf.com, a multi-million dollar profitable golf media property that Mike and Kass sold to Time Inc in 2006. In Today’s Episode with Mike Lazerow You Will Learn: 1.) How Mike made his way into the world of startups way back in 1993, how that led to Golf.com and Buddy Media? Why did he decide he wanted to be a VC? How did seeing the dotcom era fundamentally impact Mike's approach to business and investing? 2.) Why does Mike believe how you operate as an investor is more important than who you are and what you have done? How does Mike aim to invest and operate with this in mind? What are 3 core elements that Mike looks for in every deal? How does Mike approach his own investment decision-making process? How has it changed over time? How does he use gut to make decisions? 3.) What does Mike believe are his biggest insecurities as an investor? How does Mike think about the challenge of moving from a collaborative angel to a competitive VC? How does Mike think about the importance of ownership today? What has Mike learned about how the best VCs engage with round construction? 4.) How does Mike analyse his own style of board membership today? Why does Mike believe that boards are more helpful for the entrepreneur than for the investor? As an entrepreneur, how did Mike prepare for his boards? How does Mike advise founders to get the most out of their boards? Where do many make mistakes? How can one optimize the board member/founder relationship? 5.) Why does Mike believe that "having sex with your partner is a feature, not a bug"? How do Kass and Mike work together in such a complementary fashion? How do they ensure that personal matters never intrude on work decisions? How does Mike think about his relationship to money today? How does Mike want to imbue the same hard work and ethics to his children? Item’s Mentioned In Today’s Episode with Mike Lazerow Mike’s Favourite Book: Man's Search for Meaning Mike’s Most Recent Investment: LeoLabs

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

• 0:00Harry Stebbings?

  Welcome back. This is 20 VC with me, Harry Stebbings. And today we're joined by an incredible entrepreneur turned investor. And I'd heard so many great things about this guest from so many former guests on the show. And so with that, I'm thrilled to welcome Mike Lazerow, serial entrepreneur and now co-founder and managing partner at Velvet Sea Ventures alongside his wife Kass. Prior investments from Velvet Sea Partners include Twitter, Square, SpaceX, Snap, Facebook, Pinterest and many more incredible companies. And prior to becoming an investor, Mike co-founded Buddy Media in 2007, selling the company to Salesforce just five years later for $745 million. Before Buddy Media, Mike co-founded Golf.com, a multimillion dollar profitable golf media property that Mike and Cass sold to Time Inc. in 2006.

• 0:43Harry Stebbings?

  And I do want to say a thank you to a range of people. This schedule was such a team effort. So thanks to Karen Klein, Ian Sigalow, Roger Aronberg, Jules Maltz, Howard Linsen, Jeff Richards, and Mike's wonderful wife Cass Lazaro for some amazing question suggestions today. I really did so appreciate that. But before we move into the show's day, I have to say I just love using Angel List's Fund Admin platform to manage my investments. The team and the platform at Angel List takes care of all my back office needs so that I can focus on working with great founders. Leading fund managers have made over 10,000 investments into 6,000 startups via Angel List, all online and all in one place. And with the recently announced Rolling Funds, you can easily find and invest in these top fund managers on angellist.com/rolling.

• 1:26Harry Stebbings?

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• 2:10Harry Stebbings?

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• 2:58Speaker 01

  You have now arrived at your destination.

• 3:01Harry Stebbings?

  Mike, this is such a joy to do. As I said to you before the show, I feel like a complete stalker. I've spoken to about 10 people about you over the last couple of days, but thank you so much for joining me today, Mike.

• 3:10Speaker 02

  Thanks for having me and you know, congrats on so many episodes, almost 2,700, really amazing.

• 3:15Harry Stebbings?

  That is so kind of you. Yes, I am like Benjamin Button of VC podcasting, but I do want to dive straight in and ask you that you had this incredible operational career and now investing with Velvet Sea. So bluntly, how did you make your way into the world of startups? And then how did you come to change sides of the table and be an investor with Velvet Sea today?

• 3:33Speaker 02

  Yeah, the simple answer is timing. I found myself at Medill Northwestern's Journalism School in 1993. This was the eve of the collapse of classified ads, which were the lifeblood of newspapers. And at the same time, I was fortunate enough to land internships at several newspapers, Fort Lauderdale Sun Sentinel, Roll Call. And around the same time, the commercial internet, so Netscape and Yahoo and all these companies took off. And I was immediately enthralled by this new thing called the internet. And it was obvious to me at the time that the future of ad based media was not that bright. And it was even more obvious after my internships that I wasn't the greatest journalist. So I just focused on the internet. I started a company at Northwestern called University Wire.

• 4:17Speaker 02

  We ultimately merged it with a company called Student And went public in nineteen ninety nine. So it's one of those Robbie Stevens deals sixty million on three hundred valuation, basically like a series B these days. And then I went on to start golf.com with Cass, my wife, my partner, my best friend. We sold that to Time Warner and moved to New York. And ultimately in New York, we started Buddy Media, which purchased by Salesforce about six years after we started. And I spent close to four years, you know, learning from the best team in software at the time and today, you know, for what it's worth. And so the transition to investor started really around two thousand and ten. We're fortunate to have amazing entrepreneurs as close friends.

• 4:58Speaker 02

  We started investing in their companies. Many of them became big companies. And so fast forward, we've done seventy five deals and, you know, Velvet Sea Ventures is the vehicle in which we are transforming all of what we have accomplished as entrepreneurs, as investors into what we believe is a scalable business that we're going to do for the rest of our life. And although the product is different than anything we've done before, it feels like every other business we've started. So we pitched investors, we successfully raised money. We have created a product that seems to be well received by our customers, the entrepreneur. And so although investing seems different, and I would never compare it to how difficult it is to growing a tech startup.

• 5:43Speaker 02

  Cass and I at least feel like we're using many of the same muscles that we built starting companies.

• 5:49Harry Stebbings?

  I totally agree. I think building a firm in many ways is building a company in many ways. So I totally agree with you there in terms of that kind of operational element. I do want to ask it slightly taking it back, and I hope it's okay for me to ask a more personal one. But, you know, I saw an incredible YouTube video that you did, and you stated about some health challenges you faced early on in life. Can you tell me about this and how it actually impacted your mindset?

• 6:10Speaker 02

  Yeah, you're really going back far. You're going back to embryonic, Mike. I was born with a congenital heart defect. I had what's called a ventricular septal defect, a hole in between the two ventricles. Luckily closed up when I was born and I was asymptomatic for much of my life. When I was nineteen, they decided they needed to go. Go in to fix it. And when they went in, they saw that my valve needed replacing and basically, you know, my heart needed to be rebuilt in many ways. And so I had two open heart surgeries within eight days of each other. After the first one, my aortic valve burst. I had zero blood pressure and I had two hours to get into the operating room and get it fixed. And really,

• 6:51Speaker 02

  I emerged out of that process when I was 19, you know, before my junior year at Northwestern, a pretty changed person. Before that, I was kind of stressed out. I stressed about the little stuff. Afterward, I was fearless. I felt like I was playing in overtime. I shouldn't have been there. I should have been dead if it weren't for great doctors. And timing, I would have been dead. And so I came out of it saying, what's the worst thing that could happen? I'm alive? That's really all that matters.

• 7:17Harry Stebbings?

  I do have to ask though, Mike, which is like, you've seen just the most incredible changes in financial markets and one being the dot com era and the boom and the bust. And so Nick Mate, our mutual friend asked, how did the dot com era fundamentally impact your approach to business and investing in the companies that you do today?

• 7:34Speaker 02

  Great question. I've been working on tech startups since 1993, 1994. So I'm coming up on 30 years and, you know, it's hard to understand cycles without either living through them or working in crypto for three months. You understand kind of ups and downs. And so on Friday, what was it? April 14th, I'll never forget this date, 2000, the NASDAQ, which is where all the tech companies were, fell 9%. And it ended a week in which it lost, I think, 25, 30% of its value. I was 25, newly married, a new house, millions of dollars of stock in a company that I'd taken public. So Uwire had merged with Student Advantage, that lost 80% of its value. So here I was, a

• 8:17Speaker 02

  young guy on paper, seemed to be worth a lot, and now not really worth a lot. And so I learned a few lessons the hard way. And I think those lessons still drive me today, both as an entrepreneur and as an investor. You know, as I think about it, it's raise more money than you think you're going to need. As an entrepreneur, figure out how much you need to execute your plan and then raise two times that number, one and a half. Times that number, it almost always takes more money and more time than you think. Because you're an entrepreneur like me, you're eternally optimistic. And so just make sure there's some padding. Two is fundamentals matter. No matter how hot your company is, it'll eventually be valued based on fundamentals. So, sales, profits, growth, net cash retention, whatever your key metrics is.

• 9:00Speaker 02

  You know, as I say often, losing money is a short-term tactic. It's not a long-term strategy. And the last is that just big businesses emerge from crises. You know, my stock from the UIR IPO was crushed, but that's the same year I started golf.com. And that turned out to be a bigger win. Without that win, I wouldn't have moved to New York. I wouldn't have done Buddy Media. And then Buddy Media was founded in 2007 at the beginning of the 2007, 2008 global financial crisis. If you just look at what happened last year, the world shut down tech businesses. You know, we're accelerated, some great startups went from zero to unicorn status. So, you know, raise more money, focus on fundamentals. And when there are downturns, it's a great time as an entrepreneur to start a business.

• 9:45Speaker 02

  And it's a great time as an investor to deploy capital.

• 9:48Harry Stebbings?

  I want to start on really kind of the aspect of the art of venture. Cause I always think it's like a craft. And you said before, how you operate as an investor is more important than what you do or what you've done. I thought this was a really intriguing one. What did you mean by that statement?

• 10:03Speaker 02

  Well, I think what I meant is that money in today's market is fungible. You can get it anywhere. Experience and reputation are not. So in venture, if you look at the great returns, experience and reputation drive results for the funds. And entrepreneurs want to work with experienced and great investors with great track records and great reputations. And so as a serial entrepreneur and now investor, I've had the benefit of knowing so many great investors. And I felt what it's like to work with the most respected investors. And so when I sit here today, it's hard for me to tell you all the specific things. Roger Ehrenberg, Karen Klein, Howard Lindzen, Ian Sigalo, Jeff Richards, Jules Maltz.

• 10:46Speaker 02

  You know, many others did to help me as investors in Buddy Media. I really don't remember what they did. However, I can tell you without thinking how they interacted with me, how they showed up to meetings, how intently they listened to me, how they made me feel during good times and bad, how seriously they took my asks. And so being a great investor is part therapy. It's part advisor. I find that many of the entrepreneurs know the right answer. They just need someone to talk to. And so when I look at what we're doing at Velvet Sea Ventures, I don't judge Velvet Sea by the total assets we have under management.

• 11:21Speaker 02

  Even though we're happy with what we have, I care much more about how we show up, how successful we are at transferring some of our experience, our reputation to the entrepreneurs, especially early stage. So we can produce outsized results for everyone, including the entrepreneur. There's nothing better than seeing an entrepreneur come into wealth. That will change generations of their family. It's really an awesome feeling as an investor.

• 11:46Harry Stebbings?

  I'm totally with you on that. You mentioned Jeff Richards earlier. I spoke to Jeff before the show and he in particular wanted to ask, when you think about now investing full time and the lessons learned moving to venture full time. In particular, you've had some early home runs, you've had some that haven't worked. If we take the home runs first, what have you learned from your early home runs?

• 12:05Speaker 02

  So the early home runs, both investing out of our own balance sheet and now Velvet Sea Ventures really boiled down to three things that I think we all know, but we forget often. One, team. Obviously, it's always about the people. Does a team have a track record of winning? Is the team the right team to tackle the problem they are addressing? Winners win. And I see it again and again, winners figure it out. And so it starts with that because even though we're entrepreneurs, we don't want to run the company. We want to support the company. We want to be called when there are big issues that the founder wants to work through, but they're the ones who are building the business. Second one is market. It's hard to change pilots mid-flight. It's even harder to change the market you're operating in.

• 12:48Speaker 02

  Basically, will the market be large enough to support several massive growth companies? I've never seen a large company emerge in a tiny market. And so the market is so critical. And then the third is just networks matter. It takes a To grow these businesses, no matter what the company is, you need to have people around the table. And so I look at the companies that really have hit it out of the park with Velvet Sea. And you know, it's Walter Driver at Scopely and you know, Yoni at Etoro and Dan Seppertly at Leo Labs. Those are people who have built networks around the company that support them, support the company. And so we always look at kind of who are the co-investors, where do employees work before joining the company? Who is in the year of the founders? And when we do a late-stage investment, like we've done with some of the companies I just mentioned,

• 13:33Speaker 02

  we look at as we're a welcome addition to the party, we're not party crashers. And so my two questions, every entrepreneur, it's what are your top three areas of focus? What do you need to do this year to win? And number two is, how can I help? And those are my two questions.

• 13:46Harry Stebbings?

  If we deconstruct that, I'm too interested. This is a shit question, so you can forgive me for it. But like, on the winners' win element, I'm totally with you. For me, a leading signal of a winner is like someone who's done great at a poor platform before is a good example. Like, what are the indications to you of winners? Like, how do you sense the eye of the tiger?

• 14:05Speaker 02

  Well, first of all, serial entrepreneurs produce great results. And the reason is you learn so much in the success or the failure. And so sometimes when you lose, you've done all that you can, but market turns against you. For whatever reason, it didn't work out. And that's the easiest way. And I just feel it myself. The first company was really hard at Northwestern. Second one was easier. Third one was easier. They're all hard, but you stop making some of the big mistakes and it's easier to raise money. The only way a company goes out of business is they raise money. Show me a failed product and 20 million in the bank, they still have a shot. Show me a successful product that can't raise money and you know, it'll go out of business.

• 14:46Speaker 02

  And so I think it gets back to one of something, it's hard for me to do, but I have to continue to do it. Your gut reaction is usually right about people. And so that first gut reaction that you have is so critical. The problem is the next two weeks, you try to talk yourself out of that gut reaction. So you say, oh, like this isn't feeling great, this pitch or this person or whatever it is. And then you start Justifying why they're great and why you're wrong, right? And so I think winners have a few characteristics. One of them is they can build networks and teams and get people on board with their mission. So, you know, Michael Jordan, incredible basketball player. He didn't win until he started really putting together the team.

• 15:28Speaker 02

  I don't think there's anyone better in sports than Tom Brady in crafting a team. What he did last year was incredible. So there are a lot of other ways to do it, but I think it's one of those things that winners just put the diamond on the table and say, this is what it is. Everyone else kind of explains it away. Oh, this is why it didn't work. It's if only this.

• 15:47Harry Stebbings?

  Can I ask, you mentioned kind of sitting on decisions and talking yourself out of it. What do you do when you just don't know, when it's really hard and you just don't know? What have been some of your lessons in terms of, you know, leading companies, making investments where you're like, I don't know the answer here?

• 16:01Speaker 02

  Well, the biggest gift of my professional life has been Cass, my partner. We have a very healthy, and when I say healthy, to some people it may seem aggressive, but a very healthy process, debate stuff.

• 16:14Harry Stebbings?

  What's the process?

• 16:15Speaker 02

  Well, the process is I come with a thousand ideas. I love entrepreneurs, everything's great. And she was the operator. She was the one who made the trains run on time and built the culture and really focused on how do we build the organization? And so it's a combination of, in order to win in venture, you need a great vision of where the world's going and the ability to execute to get there faster. And so you need both. If it's a bad vision and you're executing the wrong thing, it's not going to work. If it's a great vision with no execution, it's not going to work. And so as we look at investments, we are a firm that is unanimous. There are four partners and so it's a family firm, Cass and me, John, Jim Petroni and Matthew Giampetroni. We're all in with deals that we like. I have to first convince myself that I like the deal.

• 17:00Speaker 02

  Cass has to convince herself if it's her deal. You then have to convince everyone else. And so that process helps us weed out deals that maybe we shouldn't do. Now, we're an early firm. It's an extension of how Cass and I always operated, but we don't think that there's Cass deals or Mike deals or John deals or Matthew deals. They're velvet C. Venture deals and we're all in when we do an investment, all of us.

• 17:24Harry Stebbings?

  Can I ask, you mentioned that kind of Cass and the impact that she's had on your professional career and obviously your personal life. But we chatted before about this and you said a brilliant statement, which is having sex with my co-founder is a feature, not a bug. I never expected to say that on the show, so that's a first for me. Why do you think working with your wife as you do is such a superpower? Because as we know, most VCs go, ah, husband and wife team, and suddenly get scared.

• 17:46Speaker 02

  You know, Cass is a special person and so she's intuitive, she's empathetic, she's compassionate. And she has an ability to sense things which I can't. And so we have a partnership that I think is the greatest founder partnership that I could ever have. Which is, we do exactly different things. I'm much more like sales, external, you know, for our companies, raise money, product. And she's much more internally focused. And so although we're partners, we don't overlap, we have complete trust. And when you start a company with a co-founder, usually you're not married to them. Even though there've been great results from married co-founders, you basically are getting married. I mean, you're spending more time with your co-founder than you are with your spouse.

• 18:30Speaker 02

  And any two thinking people who are smart and thoughtful are going to have disagreements. And how you work through those disagreements, how you emerge stronger is really important. And so when we have, you know, we have three kids and three dogs and we've done all these companies and now this fund. We know how to make decisions, we know have disagreements and we know how to, you know, go to bed, not upset with each other, which is key.

• 18:53Harry Stebbings?

  How do you not let personal situations infiltrate into business decisions? Because you could have a fight in the morning and then you're in an investment committee later and she's still pissed at you for what you did earlier. How do you create that divide?

• 19:06Speaker 02

  So there's trust and there, and we're all in. So there is no difference between work and life. Cass is Cass, Mike is Mike. I tried to retire after leaving Salesforce, I did an awful job at it. And this is what we do, we build businesses, we invest, we feel very fortunate to do it. And so when we have a disagreement, we're not passive aggressive, we're aggressive aggressive. Work through it and we get to a better place. And after you do something with someone for twenty, we've been married twenty two years almost. And we've been together for twenty five years. You learn how to take care of the me, take care of the we personally and that business. And we've just been very fortunate. Having said that, it's not always been easy.

• 19:49Speaker 02

  As all of our board members and anyone who's worked with us knows, like any co-founders have disagreements. But we think we are incredibly lucky having what we have. And we've built just amazing, not only success in business, but with the three kids and the life that we have.

• 20:05Harry Stebbings?

  Totally get you. Can I ask, you mentioned there about retiring. Why did it not work? And what did you learn about yourself from that time?

• 20:11Speaker 02

  So I love painting. I got a studio. I was a little burned out, traveling the world. Frankly, Salesforce is incredible company. I was working probably harder at Salesforce than I was at Buddy Media. And I was working really hard at Buddy Media, traveling all over the world and Dreamforce. And it's always on. And so when I left, I just wanted to take a little time. And what I realized is that hobbies are things that you love, but you're not. And so I found myself just getting frustrated, trying to be an artist and gravitating back to what I love, which is entrepreneurs and tech. And very soon we started ramping up our investing activities and took a little time to understand that it's just what we do. So what we do is venture and it's a part of who we are.

• 20:56Speaker 02

  It's our friend group. It's our support group. It's our love and we feel so lucky to be able to do it for a living. I mean, the fact that we get to learn about new companies, meet entrepreneurs and make money in the process. We're so lucky in so many ways.

• 21:12Harry Stebbings?

  How do you feel about your relationship to money? We chatted about it a little bit before the show, but you know, you've had many successes. The profiles have changed financially. How do you feel now about your relationship to money?

• 21:22Speaker 02

  Money was never the reason I started the companies. So when I was at Northwestern in nineteen ninety three, you do not start an internet company because you want to make money. There are thirteen million people on the internet. There are no viable business models, even though you see them coming. You have no examples of. Huge companies that have emerged. I mean, this is like pre, you know, Mosaic browser, right? I think what it represented for me is the money became my ticket to freedom. So I didn't have to go be a reporter at the Delaware State News, which is where one of the internships I had. I didn't have to go get a job in finance or anything else. This became my way of not getting a job. And what became not getting a job, all of a sudden I was the most experienced person in the room.

• 22:06Speaker 02

  Because if there's no internet, no one's an expert in the internet. So all of a sudden, you have these twenty-two, twenty-three, twenty-four-year-olds who had lived in the internet in the same way that you have these crypto-rich entrepreneurs who have just grown up, you know, trading and in this decentralized world. And I think what we realize is the money provided a few things. Security, peace of mind, health insurance for us, you know, as I said, had the heart issues. And the ability to have experiences that have really changed our life, whether it's through philanthropy or taking the kids to Africa or, you know, other places. That's really all that matters. We don't buy stuff.

• 22:42Harry Stebbings?

  Can I ask, you know, it is also, you mentioned, you know, obviously the three children. You want to bring them up also with that in mind and with the right relationship to money. How do you think about instilling and implementing the work ethic, the desire that you had, when the financial profile for your children is maybe very different?

• 22:58Speaker 02

  It's hard. I didn't grow up in New York City, first of all. I didn't grow up around money. Our hope, and this is a work in progress. So our kids are, you know, we're talking about nineteen, seventeen, and fourteen. So by no means do we think we have nailed this. But we think that if we model the behaviors that we think are important, that's the only way to learn. There's nothing we can say to them. You know, we can't say be a good person. We can't say to them, you know, any of these traits that we would love to give to them. Self-awareness and compassion and empathy. You can't talk about them. You just have to show it to them. Part of that is being there for them. And, you know, I used to say every night before my kids go to bed, and I still do it if they're around, you know, love you, always be here for you, and everything will be okay, right?

• 23:43Speaker 02

  Like, kids want to be supported. They want to have guardrails up. And they want to learn, like, what does it mean to, you know. Have a meaningful life, be a good person. I think the only way to do that is to model it. Unfortunately, if you model it on the other side of not doing those things, that's where you see a lot of kids spiral out of control. But it's hard for kids these days with social media always on, external validation, a little more difficult than when I was a kid.

• 24:09Harry Stebbings?

  I think there's an interesting parallel here, which is you mentioned guardrails there. And you also have to take the guardrails away to let them fall and learn in some cases and have those experiences. You do with founders too. You've seen so many companies scale in the early days and make mistakes. And I'm sure you have it with the portfolio today where you know they're going wrong, but you can't cross the line of operator. And so I guess my question is, how do you think about a guardrail to keep up versus a guardrail to remove and let them learn on either side as a father or as a founder?

• 24:37Speaker 02

  So it's much easier with founders. And the reason I say that is we have experience doing what they did. We can share our ideas. If they listen, great. If they don't, great, right? We don't want to run the companies. We love entrepreneurs. If the entrepreneur isn't happy, if they're not feeling supported, if they're not comfortable, they're never going to succeed. And so we do not have a heavy hand. And the second that we come in with guardrails, with any sort of parental type heavy hand, it kills the relationship. I didn't like it when entrepreneurs, when investors tried it with us. Having said that, I love robust conversation disagreement.

• 25:17Speaker 02

  Our board meetings were combination at Buddy Media, WWE and Hug Fest. Yeah, we had strong opinions on our board. We had Eric Hippe and Ian Sigalow from Greycroft and Jeff Richards and Karen Klein. These are big brains, big personalities. And we just went at it and then we all hugged at the end and moved on. And so kids, I can't say I have experience as parents. This is our first time, right? Your kids, the default position is you're wrong. Founders, the default position is maybe you're right. Founders respect you. Your kids are like, you're embarrassing me. You're goofy. You make weird sounds. I don't want you to see my friends, right?

• 25:54Harry Stebbings?

  That's funny. I do want to ask you, you mentioned the board member element there. And you said about not having the tight Reigns of control. And I find that interesting because I'm with you. I absolutely don't either. How do you think about your style of board membership?

• 26:06Speaker 02

  So I don't think the board membership matters to the fund. So we don't say we need a board seat. We don't say that we don't need it. And so if an entrepreneur invites us on the board and we think we can contribute, we'll be on the board. And so I'm on some boards right now, but I don't look at startup boards. And when I say startups, really pre-IPO, as anything other than the sounding board and the guidance that the entrepreneur needs to push forward. Now, there's a comp committee. There are certain things that are just the nuts and bolts you have to do, the audit committee. But those are kind of like working groups in the company. Venture, if there's a decision that you have to make at a venture company that everyone isn't on the same page, it's usually an issue, right?

• 26:48Speaker 02

  You know, ventures kind of binary. These things go or they don't. And if you're really looking at financial engineering and your control provisions and all this stuff as your downside protection and you're actually going to activate it, it usually means something is messed up. And, you know, all I can say to other investors is, you know, the most important thing is to listen. You know, I go into board meetings saying, I'm going to say very little, but what I say, I would like to count. And so it's really, you know, listening to what's going on. And in the cases where I am on the board, because I'm so different than just the typical investor board member, I actually will have a conversation with the founder before the board meeting. And I'll do a deep dive, like, hey, let's talk about what's going on. And I'll help you figure out, you know, how to structure the meeting.

• 27:33Speaker 02

  There's nothing worse than showing up to a meeting and they're just regurgitating information for the red beforehand.

• 27:38Harry Stebbings?

  I totally agree with you. And that takes me to something that actually I loved. And it was Jeff at GGV told me about the two to three pages you used to write pre-board meeting. He said, if you don't read it, don't bother coming. Talk to me about that. How you prepared for board meetings, what those pages contained and what you wanted to get out.

• 27:56Speaker 02

  Yeah. So board meetings for the investor, I don't think are as important as the entrepreneur. And so for the board meeting, I treated it as a way for me, there was a forcing function to step away for a second. Usually I did this on the weekend and I would all. Of my, you know, direct reports would provide me their information. So financials and marketing plan and, you know, a lot of it I had, but I was, you know, I wanted them to present to me as if I was the board of like, you know, what are you focused on and what are the key metrics, all that stuff? I would then take it in, synthesize it and then put together, you know, it was usually much longer than two or three pages. I mean, it was usually 10 pages, you know, sometimes longer than that.

• 28:32Speaker 02

  And my belief is that if I can't clearly articulate where the company is, where it's going and the resources that we need to get there, no one in the organization is going to know it. And so if I can't convince myself that what we're doing is right, it's definitely not right. And even if it is right, if we're just kind of meandering in a directionally correct way, no one on my team knows is going to know what's going on. And so creating, and I learned this more from, I think, you know, Marc Benioff with his V2 mom and how he, you know, a lot of people said, you know, Salesforce has a lot of off sites and, but, you know, Marc really drove home the idea

• 29:08Speaker 02

  that there are only eight to 10 things we're going to do as a company. Each one's going to have an owner. Each of the owners is going to have metrics and obstacles, you know, associated potential obstacles. And so the board meeting for me was kind of my way to communicate to the board, this is what's going on. I'm not going to present to you. And I would like drop stuff in the letters, as Jeff probably told you, that I would ask about, like totally random stuff, right? There's no way that they would know, like personal stuff about me. And I would ask someone in the board meeting just to see if they read it because there's nothing worse than an investor shows up to a board meeting like unprepared, in my mind.

• 29:45Harry Stebbings?

  What do you do if they haven't read it?

• 29:47Speaker 02

  Well, most of them did because I think after the first meeting, they were scared, you know? Because, you know, the good investors look at entrepreneurs as their customers. If they didn't, I probably would have been like, dude, not cool. Or I mean, it wouldn't have been Karen Klein. She like reads everything and will call you and like be so great about her discussion.

• 30:05Harry Stebbings?

  I guess I'm really digging here. Like, what do you advise founders to get the most out of their board? Is it the board prep? Is it the communication that they do? Is it the pointedness of the questions they ask? What do you advise founders to get the best out of their board?

• 30:18Speaker 02

  Communicate clearly.

• 30:20Speaker 02

  Communicate regularly, communicate the wins, communicate all of the shit sandwiches that are going on. There's not one company that doesn't have just stuff blowing up every day. Let's just say great venture investors have no problem with bad news. Our day is loaded with bad news. We have a huge problem with surprises. Don't tell me you're right, you're gonna run out of money next month. Don't tell me after the fact, like three months that you lost the biggest customer. Share all of the good news, the bad news, not in a way that you're trying to paint it a certain way. And typically it comes in like, here are the wins and here's what I'm worried about. We've lost these customers, we've lost these employees, our net promoter score is down 20%.

• 31:03Speaker 02

  Whatever it is, right? We didn't hit our revenue numbers. It also feels good because bad news eats you inside. If you don't get it out, if you don't share it with someone, it will just stack on top of each other, like really heavy books you don't wanna read, and then eventually fall over. And either create disastrous effects for the business or disastrous effects for your health. You know, founder depression is really a big issue. And a lot of it is because of the gap between what they think the expectations are and the reality of their situation.

• 31:33Harry Stebbings?

  Can I ask, in terms of that willingness to communicate that bad news, I totally agree. My question is like, what do you do as an investor, as a board member, to let me, the founder, know that this is a safe space? You can tell me anything, because I think it's our job to create that safe space where they feel they can tell you anything. What do you do? And what did you as an entrepreneur want from your investor to know that it was a safe space?

• 31:55Speaker 02

  Any relationship that's worthwhile is just communication. It's over-communicating. I feel like as the entrepreneur who now is an investor, it's up to me to share expectations. And my expectations is keep me posted, be real, good news, bad news. What can I help with, which is like, which are issues that are important? I don't wanna run the business, but if you get an offer from a company to buy you, who else are we gonna talk to? And I can help set up those conversations, right? If you're gonna raise money, I can start making introductions a year before to great investors. A lot of the people who we've spoken to. Just sharing the expectations that I want to be a partner. I don't want to be your boss. Now, I have the benefit of having Cass on my side.

• 32:37Speaker 02

  And Cass is the best CEO whisperer I've ever met because she doesn't take board seats for the most part. And there is a dynamic as an entrepreneur that your board investors, you feel that they have more weight than your investors who are not on the board. You know, it's natural as a human being to feel that way. And so sometimes there are issues that they don't come to me and I don't want them to. I'm on, you know, super rare NFT art marketplace. I'm on the board. John Crane has a great relationship with Cass. And Cass has helped on hiring and structure and processes. I look at, you know, Dan separately over at Leo Labs, who has worked with Cass to find a general counsel and a CFO.

• 33:18Speaker 02

  And helped do the deck for the series B. And then we made the intro to insight that led with us sixty five million dollars. Series B for, you know, the low earth orbit, you know, company. Those are relationships that maybe it's not a board level thing, but having this person who is empathetic, who has been in their seat, picking up some of their work and just helping them. Like, it's not easy for first time entrepreneurs to find world-class CFOs, CROs, you know, chief customer officers, you know, VP of finance.

• 33:49Harry Stebbings?

  Can I ask you a bit of a weird one before we move into the quick fire? It's like, you know, you speak with this incredible serenity and calmness and you've just seen everything, like from, you know, the incredible years building. What are your insecurities today as an investor?

• 34:01Speaker 02

  So I didn't have a ton of insecurities when we were investing out of our own balance sheet. We did about sixty deals, you know, with our own money. We never raise outside capital. And so when we decided to, you know, partner with Jim Petroni's and do Velvet Sea Ventures, you start asking yourself questions like, okay, I've gotten two hundred and fifty thousand to a million dollars of like personal allocation for all these deals. Can we get ten million? Can we get twenty? Can we get fifty million, which is, you know, the largest deal that we've done? Are we kind of like a cute addition to the cap table or are we like a strategic investor? Cause we want to work at the highest levels of venture with the best co-investors. The best entrepreneurs.

• 34:41Speaker 02

  I had all these other insecurities that I hadn't felt since I started really U Wire at Northwestern. You know, I think everyone, no matter what they've done, you know, has this kind of imposter syndrome. And so although I'm friends with all these PCs and I've made all this money on the investments and I was pre-IPO and all these companies including like Facebook and Tumblr and like, can I do it for a living? And so as we come out of like our first fund and we've been able to, you know, invest in 15 companies. You know, the most important thing to me is we've product market fit. We are people who at least 15 entrepreneurs have said, I really want you. And many of which wanted us to lead and there's no better honor that we could get of getting a yes from an entrepreneur.

• 35:25Speaker 02

  You said it early on, it is so competitive and so we can just be who we are. I can't show up and say we have a 40 year track record and blah, blah, blah. We could say, hey, we're husband, wife is what we do, is what we believe. Here's our track record, love to work with you. Here's every entrepreneur we've worked with, go call them.

• 35:41Harry Stebbings?

  Do you worry ever that, you know, when we mentioned the incredible names of the mutual friends we have in venture before? Before when you were personal investing, you were collaborative, 250 to a million. They can bring you into rounds, you can bring them in. Now, in many ways, you could be competitive. How do you think about that move from collaborator to competitor? And how do you get around that?

• 35:59Speaker 02

  So that was one of my big fears. And so the way we've gotten around it is being who we are, which by nature is collaborative. We don't have sharp elbows, optimize for the long term and not any deal. There's not one deal which, you know, we're going to go to the mat and say, we need the whole allocation. We need this, this, this. As soon as we start talking about like we need, we're done. Like it's not about us, it's about the entrepreneur. Most of the terms are pretty standard these days. So we don't even have to negotiate that many terms. And so I just look at what we've got to date and, you know, if I look at, you know, a company that I helped seed way back when, Scopely, you know, he didn't have to open up allocation for Velvet Sea. And a few rounds ago, we got a really big allocation because we've, I think, been helpful.

• 36:44Speaker 02

  I look at Sutra, which is a startup in the fitness space and that's one I collaborated with Jeff.

• 36:50Speaker 02

  On right I look at Leo Labs that I just spoke about I sent it to Devon Parek one of my idols in the investing world who is also on our board and we co led it together and so we keep our funds relatively small we have iconic business builders you know our investors and LPs there's plenty of money to go around more and more LPs are saying that you know venture actually is an asset class and let's shift more dollars to it and so it's not like for us it's about you know the super rare company which I talked about we cut back our allocation significantly in order to make room for Mark Benioff and bunch of our friends who wanted to be investors right so it's how it gets back to that first comment how you operate is so much more important no one cares that I led all these rounds and that we made all this money they care that we're like gonna be with them during good times during bad times and we're gonna be who we are that's all we can do

• 37:46Harry Stebbings?

  Can I ask one final one you mentioned some of the incredible companies you work with and then we'll do a quick fire but it's like you know when I think back to my biggest miss it was because I listened to a reference from a former boss and it said what a terrible employee they were and what a terrible employee they were and I was like oh no and I I took that very seriously and I didn't make the investment six million pre now it's like eight billion or whatever it is that was my biggest miss and now I've changed my process a lot when you think back to your biggest miss what was that and how did it change your process

• 38:13Speaker 02

  So my biggest misses were really as a personal investor you know sitting in a hotel room in two thousand and eleven with Kevin Systrom and Travis from Uber and you know having the opportunity but not raising my hand and saying like hey I'd love to invest right I think my biggest mistakes as a venture investor has involved selling too early and so when you're investing your own money you know you kind of want to recycle capital and I look at some of the deals in which we took money off the table and it's like oh that was a mistake you know I was concentrated in Salesforce stock I sold some of that I have companies that I seeded I took money off the table you know one of them you know Braze is going public I helped get that company going Miles Kleiger was one of my top partners at Buddy Media incredible

• 39:00Speaker 02

  Company, right? And so what I've learned, which I wish I knew at the beginning of venture is just hold on and keep investing in the great ones. And that's what Velvet Sea is all about. It's all about like, oh, you're raising another round, we're putting in more, right? Like, we put fifteen million dollars more into Leo Labs because he's doing such a great job creating the data service that makes sure that satellites don't crash into like nuts and bolts. And so it's like, he invited us in because we'd been so helpful, right? I'm not selling Leo Labs, maybe ever, right?

• 39:31Harry Stebbings?

  You mentioned the elastic checks there, and then we're doing a quick fire because I could just talk with you all day. You mentioned the kind of large check sizes you've done in some respects, the fifty million in your largest case. Is it a captive fund? Is this SPVs? How do you think about the elasticity of the fund supply?

• 39:45Speaker 02

  Yeah, so we're registered investment advisors, so we don't talk that much about the structure, but we have funds which, you know, we invest out of. And all of our partners, including us, you know, often want more allocation in certain deals. So it's very easy to spin up other entities to do more of a single purpose investment. We just believe in meeting entrepreneurs wherever they are, we're multi-stage. And if we can help with larger check, we'll do it. But we're not interested in just kind of putting together massive, there are only four partners right now, we're not interested in putting together massive funds that would be hard for us to deploy right now.

• 40:20Harry Stebbings?

  No, I totally get you there. And I'm sorry, I was too intrigued on that one. I do want to move into a quick fire then, Mike. So I say a short statement, you give me your immediate thoughts. Are you ready to rock and roll?

• 40:29Speaker 02

  I can't wait. This is my favorite part of your show.

• 40:31Harry Stebbings?

  Oh, it's my favorite too.

• 40:32Speaker 02

  And I really hope I don't screw it up, but I'm a little nervous for this, but I'm ready.

• 40:36Harry Stebbings?

  Listen, the joy of editing, my friend. Tell me, what is the favorite book and why do I have to read it?

• 40:41Speaker 02

  My favorite book by far, and not even close, is Viktor Frankl's Man's Search for Meaning. It was a book that I've read many times. I've given it away to many of your listeners. You know, it captures Viktor's years as a prisoner in Nazi concentration camps during World War Two. And it's really about the most important part of being human, which is identifying your purpose. Identifying something that gives you purpose, no matter how miserable the circumstances are, something to feel positive about. Something to immerse yourself into and it's just been an inspiration for me. I don't have any right here at my desk in New York City. Next to my desk, I have just a stack of these. And when I think someone needs it, I send it to them.

• 41:20Harry Stebbings?

  Tell me, what lie do rich people tell themselves most often?

• 41:24Speaker 02

  My biggest lie is I know the answer. What I found was the day we made money or the day most people make money is the day people think they know all the answers. You know, everyone around you thinks you know the answers. And more dangerously, it's the day you start to think you know all the answers. Just because you made money doesn't mean you're an expert in anything, let alone everything. It usually means you worked hard and got a little lucky. You know, be careful not to think that you know all the answers.

• 41:48Harry Stebbings?

  What piece of advice do you often give, but you find hard to take yourself?

• 41:51Speaker 02

  I mean, I hinted at this earlier. It's just trust your gut. Like at least for me, my gut is always right. Trust it, tune into it, believe it. You know, there's something about like intuition and experiencing all these things that that first reaction is the right reaction. Every other reaction is typically bad. Now, if your gut has gotten you in trouble, like, ah, I shouldn't listen to my gut. It really is awful. Then don't listen to it. But I, most people, the gut is really where the truth lies.

• 42:20Harry Stebbings?

  What do you know now that you wish you'd known at the start of your investing career?

• 42:25Speaker 02

  I mean, really, what matters is not what deals you miss. It's easy to sit back and look at all the success that your friends are having. You know, what matters is what deals you do. And that drives how you spend your day. And most importantly, it drives the size of your returns. Whether another fund does better or worse, doesn't matter. You just have to do the best that you can do and don't sell too early.

• 42:45Harry Stebbings?

  Final one for you, Mike. What's the most recent publicly announced investment? And why did you say yes and get so excited?

• 42:51Speaker 02

  Yeah, I've now talked about this company a bunch, you know, Leo Labs, which is our last one. We just announced it, sixty five million dollar Series B funding. Velvet Sea led the round with Insight Partners. We've now, you know, we've made three investments as a fund into the company. My partner, John, was one of the early investors in the company as well. I mean, it's extra sweet because there aren't many more confident or nice people than Dan. You know, Dan Sepulvede, who is the founder, CEO. You know, we made the investment because they've been executed. We think it'll be one of the most important companies in one of the largest emerging markets, which is low earth orbit, which really is where the action is in commercial space. And they basically make the business of space possible. We're so excited to be a partner with.

• 43:36Harry Stebbings?

  Mike, I knew this one would be an open and expansive discussion. I can't thank you enough for putting up with my way with questions and I just so appreciate you coming on the show.

• 43:44Speaker 02

  No, I love the show. I'm so honoured to be here and your first 3,000 guests. I try to be the first 3,000 guests of podcasts and you're a true legend in venture and I really appreciate everything you do.

• 43:59Harry Stebbings?

  I mean, just such a special episode for me to do that. As I said, I've just heard so many great things from so many former guests on the show. If you want to see more from Mike, which is a must, you can follow him on Twitter at Lazarro. Likewise, it's always great to see you behind the scenes. You can find us on the 20minutevc.com. But before we leave you today, I have to say, I just love using AngelList's fund admin platform to manage my investments. The team and the platform at AngelList takes care of all my back office needs so that I can focus on working with great founders. Leading fund managers have made over 10,000 investments into 6,000 startups via AngelList, all online and all in one place. And with the recently announced Rolling Funds, you can easily find and invest in these top fund managers on angellist.com/rolling.

• 44:40Harry Stebbings?

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• 45:23Harry Stebbings?

  And finally, did you know that there will be 1.4 million job openings for developers in 2021? That's when my friends at Terminal come in. Terminal helps fast-growing companies build remote, high-performing tech teams. By connecting you with elite global talent and owning end-to-end processes from hiring to onboarding to remote teams integration, Terminal delivers the product-building powerhouse your business needs to grow. From workspaces to on-the-ground support, they take the guesswork out of remote management so that you can just thrive. But don't take my word for it, take the word of high-growth businesses like Gusto, Chime, Hims, all trusting Terminal with their remote teams, and you can find out more today at terminal.io. As always, I so appreciate all your support and stay tuned. Later this week, we have the memo on Lyft with Anne Murako at Floodgate, such a special one coming there.