20VC: WTF is Going On in VC? Are VCs Still Investing? How Has What VCs Want in Investments Changed? Are LPs Investing in New Funds? Why VCs That Invest in Public Markets Are Losers? Dec 2023; Will It Be Better Or Worse with Jason Lemkin

The question is: "are VCs still investing?". Today we are joined by Jason Lemkin; one of the OGs of SaaS of the last decade. As the Founder of SaaStr, he has inspired more SaaS founders than one can imagine building “The World’s Largest Community for Business Software.” Jason also invests out of the $100M SaaStr Fund and in the past Jason has led rounds into TalkDesk, Pipedrive, Algolia, Gorgias, Salesloft, and many more incredible companies. Prior to founding SaaStr, Jason was the Co-Founder of Echosign, an early e-signature business, funded by Emergence Capital and that was acquired by Adobe for $100M. In Today's Episode on "Are VCs' Still Investing" We Discuss: 1. What Does it Take To Get Funded Today: Early-Stage: How has what VCs want in early-stage investments changed in this new environment? Should startups prioritize growth? Profitability? Capital efficiency? How long a runway is sufficient enough for founders to feel comfortable? Why does Jason believe most founders are still deluded that they are fundable? Growth Stage Companies: Is the growth stage totally dead? What will we see happen to all the companies that raised $50M+ at large valuations that have very little revenue? Why does Jason believe that any operator who joined a $BN company in the past few years will not make any money on their equity? What should they do now? Will we start to see down rounds and structured rounds at the growth stage? If so, when? Public Markets: Why does Jason believe this is a time unlike any he has seen before? Are we in full recession now in Jason's mind? In Dec 2023, will this be better or worse? Which are the most under-priced assets in the public markets today? Why does Jason believe VCs investing in public markets are losers? 2. Micro Funds Will Be Decimated and LP Behaviour in 2023 Why does Jason believe that micro-funds in 2023 will be decimated and unable to raise new funds? How will the majority of LPs approach new fund investments? How will LPs approach re-investing in their existing managers? How has what they need to see changed? 3. Marketing and Sales: We Need To Change Budgets and Targets How should CEOS be changing their marketing budgets in 2023? What are the single biggest mistakes CEOs are making in this downturn with regard to their marketing budget? How do sales targets need to be amended in the face of changing buying patterns? How do the best sales and marketing leaders respond to these changing budgets and targets? How do the worst respond?

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

• 0:00Jason Lemkin?

  There's a lot of advice which is wait till the markets thaw. It's not that simple, man. They're not coming back. They're not bouncing back to 2021. They're not bouncing back to good times.

• 0:08Harry Stebbings?

  So this episode came about as I was having many discussions with founders and they really asked me a couple of questions. Are VCs still investing? Should we delay our raise until later in the year or 2024? How should we amend our sales targets and our marketing plans in this new world? And I thought there'd be no one better to discuss these really hard questions than the always no BS S O G and a long time friend in the form of Jason Lemkin. Now, this is a phenomenal off the cuff discussion between two friends. We have no schedule. There is no intro. There's no how you got into the wonderful world of venture. I know you will love to hear that for the 3,000th time. And if you like this style of show, do let me know. I so love your feedback. You can do that on Twitter at Harry Stebbings.

• 0:50Harry Stebbings?

  But before we dive into the show's day, the single most important element of any team is their ability to work together in the best and most efficient way. And Coda is the dock where teams can work on entire projects from start to finish with everything they need, all in one place. Think about the way your team works today. If all the work is spread across different documents, spreadsheets and a stack of workflow tools like they are in all of my teams, it's tougher to focus on getting things done, let alone getting them done together. And that's why I realized that I had to have Coda and why you need Coda. Coda is the dock that brings it all together by putting data in one centralized location, regardless of format. With Coda, you'll never need to ask, where are the latest project updates? Anyone know where the performance stats are?

• 1:33Harry Stebbings?

  This is what really slows teams down and prevents collaboration. With Coda, your team can operate on the same information and collaborate in one place and get projects done much, much faster. Take advantage of this special, limited time offer just for startups. Sign up today at coda.io/20vc and get a $1,000 startup credit on your first statement. That's coda.io/20vc to sign up and get a startup credit of $1,000. And speaking of tools we cannot live without, you probably know Brax. Brax was the first corporate card for startups, but Brax has grown a lot since then to scale up. Right along with its customers, now 90% of Y Combinator grads trust Brex as their

• 2:15Harry Stebbings?

  all-in-one financial stack. I get to speak to founders all day and I know how important having the right financial stack is to their success. With Brex, you get fast access to high-yield business accounts, high-limit cards, and rewards like cash back and billboards to fuel your growth. Beyond that, Brex has the venture debt, financial modeling, and spend management solutions you need to run your startup globally and well. So are you ready to make your future CFO proud? Learn more at brex.com/20vc. That's brex.com/20vc. And finally, if coder and Brex make your team work more efficiently, Intercom makes modern customer service software that really redefines how businesses support their customers.

• 2:59Harry Stebbings?

  And their platform connects businesses directly to customers using powerful messaging and automation. Intercom enables teams to scale support without investing more resources, leading to happier customers and more efficient support teams. And Intercom has used to send over 500 million messages per month and enables interactions with over 600 million monthly active end-users, trusted by customer service teams at more than 25,000 global organizations, including Atlassian, Amazon, and Lyft Business. Check out this amazing offer. Eligible startups get advanced Intercom features at a 95% discount. So do not miss out. Head over to intercom.com/20vc to find out more.

• 3:48Speaker 02

  You have now arrived at your destination.

• 3:51Harry Stebbings?

  Jason, this is going to be a very free-form discussion, but I wanted to start with something I've been doing a lot, which is I'm in a lot of WhatsApps with GPs and they're going, "I want to invest. I want to invest." But there's no company. And then I'm going on Twitter and the companies are saying, "Are any VCs investing?" And I just want to understand, how do you see where we're at today, especially when I see what I just said there?

• 4:14Jason Lemkin?

  Well, look, I agree with you. I've been investing in venture since 2013, as we met fairly early in your career. I bolted out of the gates in 2013, right? I did pipe drive, talk disk, Algolia, greenhouse and sales opt all within 12 months. I did almost no investing the last 12 months. And boy, the markets changed a lot 12 months, didn't they? The world changed. I do think it's harder to find good deals and I think it is true and I think people are a little bit full of it on the Twitter. There's probably a lot of it going on. We all have to reset. We all took so much risk for two years and the markets were so strong that resetting to a day when we're looking for so much more out of an investment, the bar's gone up and they are harder to find. I agree with you. I look at folks on Twitter, they're like, yeah, it's whatever. January, something 2023, I've done 11 deals this year.

• 4:57Jason Lemkin?

  I'm like, kudos, because I have not seen 10 times the qualified deal flow of 12 or 24 months ago. I haven't seen it in these times, right?

• 5:06Harry Stebbings?

  What has changed in what early stage investors are looking for in the companies that we back?

• 5:11Jason Lemkin?

  I wrote this at sort of the peak of the meeting in 2021, when I was talking with someone to Sequoia and they said they called it the Postmates effect. And what they decided is that, and obviously Sequoia is ahead of most of us, certainly me, is that they realized early on when things exploded post pandemic, that at this point now, number three or number four, the market could be worth billions. Postmates, like I used it, but in the US, I think it was number three or number four, and it still sold for almost $3 billion. Ever since I was a founder in my first job and then an investor, you had to be number one, right? And back in the days when I was competing with DocuSign, I almost wanted to jump off the roof if we couldn't be number one in categories. Being number two wasn't good enough. Oh my God. But then we realized there was room for 10 vendors in every category. Payroll, sales automation, expense management. Some of these products are hard to tell the difference and you

• 5:54Jason Lemkin?

  don't have to sweat it because when Brex and Ramp and Expensify and Divvy, all of them are worth billions. Not only did it change the size of outcomes, but it changed the way we invested. We didn't have to decide who was number one. And it was very stressful in the old days until 2018 to have to know if they were number one, you'd pass on so many deals. I don't think we're back to that today, but we're back to pulling our hair out of realizing a billion dollar outcome's really hard. It's really fracking hard. And we got so arrogant in 2021, so greedy, everyone with their unicorns. I don't think anyone brags about being a unicorn today, do they? Do founders brag about it? It's gone out the window as a term of brag.

• 6:30Harry Stebbings?

  Just looking at a lot of founders who are DMing me and they're going, I don't get what you want to see. Do you want to see growth still? Do you want to see profitability now?

• 6:38Jason Lemkin?

  Yes.

• 6:38Harry Stebbings?

  Do you want to see margin improvement? What do you want to see at the early stage so I can focus my efforts? When you hear that, where do you go, ah, that?

• 6:47Jason Lemkin?

  The key to success in SaaS and be investing that I only do and you do a lot of, it actually hasn't changed that much. It's that somehow in seven to 10 years, you've got to get to 100 plus million in revenue. You just have to. Today, it probably has to be closer to 200 million because that's when you can really IPO, approaching 200 million. So you've got a decade to get to 200 million. There are certain rates that you just have to grow and whether in, and Raj from Battery, simplified it all for triple double. For me, in the old days, it's can you go from one to five and five quarters or less? That will also set you up. I guess that was a 5X, but the math has to work in founders. And the only thing that's changed is the amount of capital you're allowed to spend. In the old days, the rough rule is we could raise, including A, B, C, D, E, F, G, H, I, J rounds. You could raise 100 total.

• 7:32Jason Lemkin?

  Then that kind of grew to 400 million as the IPOs got bigger at the peak. And now we're probably back to 100 million, which is everyone has to be capital efficient in a way we forgot how to be. VCs unfortunately are looking for the trifecta. They're looking for top tier growth, but also some sort of top quartile capital efficiency. Even at a million in revenue, maybe not 10K in MRR, but even at a million in error, they're looking for this combination. And all the original investments I did, not everyone, not benchmarked Square, they all met that bar. They were all growing at top decile rates, but were pretty capital efficient. That's the market today, I think, and they're harder to find, especially with founders burn rates and everything where we have not fully reset, if we are going to reset to sort of the old day expectations, at least in SaaS.

• 8:13Harry Stebbings?

  So I do want to touch on that. I do just want to finish on the postmates effect because I totally get you in terms of the postmates effect, but it's turned out not to be true. That was in a macro.

• 8:21Jason Lemkin?

  It was true for two years. It was true. There were many exits. There were many cash exits.

• 8:25Harry Stebbings?

  True in a macro environment that was kind of artificially inflated by certain stimulus by, you know, the bodies. And now it's not true. What happens in a world then when the postmates effect isn't true?

• 8:36Jason Lemkin?

  There's two ways of looking at it. Let's step back for a minute. You don't always have to. Directly compete with someone else in your category. You can own a segment of it. You can own the SMB segment or the mid-market, or you can be focused on e-commerce or a different vertical. So categories have more rooms for number one than sometimes VCs realize. And that has certainly happened as SaaS and cloud has expanded, especially with vertical SaaS. But it's true. As founders, you have to have conviction about why you will truly win. The competition slide finally matters again. Why will you win? I always knew it as a founder, and I think the best founders know it. We need to know. And it certainly alarms me investing when I ask a founder, why will you beat the competition? And they don't know. Or my version of that question is I ask them, why did whomever stumble? Why did Postmates stumble? Why did whoever stumble?

• 9:21Jason Lemkin?

  And the best founders always have a story, and they know why they're going to win. And the almost great founders are like, I'm not sure. I'm not sure why. I think you have to be number one. But the good news for founders is there are more number ones in most categories than existed a few years back. Because SaaS is big.

• 9:34Harry Stebbings?

  I do want to ask you, when we look at, and you look at portfolio companies today, when you look at the buying patterns, what are you seeing in terms of overall SaaS buying patterns today?

• 9:43Jason Lemkin?

  Yeah, I have a very different perspective than Twitter. There is a subset of categories that are doing fine. Let's be clear, they're doing fine. There is a subset that's deeply troubled. And it's a bunch in the middle where it's just a little bit or a lot harder. And so be it, that's called life. But these folks who are saying this is the worst recession since the tulip age in Holland are out of their minds. They have no life experiences. And it's not evenly distributed. And let's talk about a few examples for a minute. But before we even get there, think about folks maybe in your portfolio here that are selling to healthcare. In the US, there's no downturn in healthcare right now. There's nothing. And I can't imagine it's different in the UK. So yes, I'm sorry if you sell only to overfunded startups. You may think that this is the worst recession since 1811. But if you sell to healthcare, and then we'll just give some others, you don't see the issue. For example, in my portfolio,

• 10:27Jason Lemkin?

  let's take a really interesting example, which is B2B e-commerce. Now, B2B e-commerce, I have two leaders I've invested in. Gorgeous, which is number one contact center in Shopify. And then Algolia, or about half of Algolia's business is in e-commerce. And interestingly, you can see the future because e-commerce actually peaked early in 2020. And then it fell off a cliff and it hit rock bottom in the beginning of 2021. It hit the beginning of 2021 and then kind of rock bottom as 2021. Came back, but e-commerce rebounded in the second half of 2022. Look at Shopify's numbers. Shopify at the end of 2022 was not the rocket ship it was at peak COVID. But Shopify has stronger numbers at the end of 2022 than it did at the start. And so when you look at folks like Gorgeous, it grew faster in the second half of last year than in the beginning. If you look at Algoilia, half its business is e-comm, half is SaaS.

• 11:12Jason Lemkin?

  The SaaS folks have multiple impacts, pro and con, but the e-commerce is up, right? So there's lots of effects and they're not even. You and I are both co-investors in a company called Revenue Cat. We're emailing on it. Revenue Cat Automate Subscription Management for mobile. It was a rocket ship. Then in COVID, it blew up. Then it kind of plateaued. And then it re-accelerated at the end of this past year, re-accelerated 2022. It has its own issues, but there's not a lot of macro issues impacting it. So I'm not saying it's easy out there. It is hard. But go find the segment of your customer base that's winning. Go find healthcare or e-commerce or mobile or some part of infrastructure, MongoDB, Okta. These companies are doing really well. Get some of that business. But I kind of quit on founders that say the world's ended.

• 11:53Harry Stebbings?

  What do you say to the founders where actually they're doing really well and they're still getting a battering? When you look at quite a lot of the SaaS companies, they're down 20, 30.

• 12:01Jason Lemkin?

  By the multiple?

• 12:02Harry Stebbings?

  Yeah.

• 12:03Jason Lemkin?

  Well, I say praise the Lord, you're private. You know what's not fun, Harry? And I've only experienced this once as a startup executive, but I've seen it in a few investments. It's not fun to be running a public company that's down 70% when your revenues are up. It's really not fun. It's a morale crusher. You tell the team to ignore it. You tell the teams there will be ups and downs. I did a great interview with Spencer from Amplitude. He was, we prepared the team for this. We said there'd be ups and downs. I just didn't know there'd be this down. Because Amplitude's pretty much hit all of its numbers. It's a great one. At least in a private company, you can hide a bit and it is a gift of being private. As long as there's no down round or a lot of drama, you can hide a little bit. And maybe that's not the question exactly you're asking, but it's a benefit of being private. Is that you can duck out some of these issues if you don't need to raise capital.

• 12:47Harry Stebbings?

  You mentioned like the buying patterns. In terms of marketing spans, how are you seeing marketing spans impacted across the board? And are you concerned about that? I am running the media company that I do.

• 12:58Jason Lemkin?

  I'm concerned about it. I have a limited visibility. Through my portfolio of 25 larger investments, but we have 200 sponsors for SaaStr, right? And you have quite a few. This is one thing where Twitter has it, okay? Which is that marketing has become myopic. Marketing is focused on this quarter. What can I spend to get more revenue this quarter? I'm under pressure from my board. My revenues are down in some cases and my burn rate has to last longer. So the CEO is only approving these marketing expenses that create revenue immediately. And they do exist out there, but the problem is it's such a small part of marketing that pays off. The only part that really pays off is like funnel assist, like taking someone that's almost ready to buy. And then they hear about someone on 20VC and that magic moment gets them to buy the next week, but nothing else.

• 13:41Jason Lemkin?

  And so we're cutting too much in marketing and I'll tell you what I think we should be doing. We're cutting too much and it's going to hurt everybody, not this week or even this quarter, but it's going to hurt everyone's gonna not gonna have enough pipeline at the end of the year. When I think things will be better, I think things will be better for startups at the end of this year. And I think we will all be hurting for pipeline. And I think we're all making the mistake. We made each the last downturns. And Mark Benioff in his book wrote, "His biggest mistake in the last downturns was cutting sales." And what did he just do? Cut sales.

• 14:07Jason Lemkin?

  He's making the same mistake three times and if Mark can't help himself, I guess I can't blame any founders. But we're all gonna come out of this with not enough sales capacity and not enough pipeline. It's just gonna happen.

• 14:16Harry Stebbings?

  So I'm a seed founder, seed slash series A. And I'm being told by everyone, "You gotta cut burn, you gotta extend runway." But then I'm also hearing you saying, "Your pipeline's gonna be short at the end of the year." So what do I do, Jason?

• 14:30Jason Lemkin?

  Well, the answer, it's actually pretty simple. It's going back to basics, which is be data driven. If you have a sales and marketing leader, give them a budget. It's just that simple. I have a million dollars to spend this year in marketing and I have an incremental half million in sales. You make the decision and spend that one million the best you can. Cutting the marketing budget to zero, wrong answer. Let them optimize what they can do with the million and trust in your team. We can't solve everything. Most of us have to extend runway right now. We have to extend it. But I think we're over cutting in marketing by not empowering people to have budgets. And we're doing the same in sales. Just tell them, "Look, you have this much to spend this year, this quarter, this month," and then trust in your team to make the best hires. Layoffs don't really solve anything. They're little snacks. They make little incremental changes, but layoffs don't create growth on their own.

• 15:13Jason Lemkin?

  Even if you did a layoff or 10 or 20%, you're still going to have budget for this year. Hey, head of sales, you get 20 hires. You get 20 hires and you go decide who those 20 are going to be. You've hit your number, right? Same with marketing. And I don't see enough of this trusting the adults on your team with number. And I don't see strong enough ops and finance support helping them do that because we don't all know how to do that intuitively. We need some help from budgeting and planning to manage it. Many VCs need help.

• 15:36Harry Stebbings?

  I think also it's funny, we've had a generation where budgeting and planning has not been a central focus because of the liquidity that we've had in the system.

• 15:43Jason Lemkin?

  Yeah, there might have even been none in some cases. I'd never really worked with a VP of Marketing before the first startup job I had. And I remember we went through a situation where we had to cut the budget. And everyone that was young on the team was kind of freaking out in our cool 50,000 square foot office in SF. But we had one person on the team over 35 or so at the time. And he walked in and he's like, okay, understood. Tell me what my new budget is and I'll start executing on tomorrow. Just that was the answer. And I'm like, who is this? Who is this godlike character, the only seasoned executive on our team? But that was the right answer. Tell me what my new budget is and I will get you as much leads, as many pipelines, as many opportunities as I can with my budget. Just tell me what it is and I'll go execute. That's what you want from your sales and marketing team. Because the problem in marketing, Harry, is everything has crappy ROI. If you want to talk about marketing, here's the problem. This is why CAC is such a flawed metric.

• 16:26Jason Lemkin?

  Let's say your average deal size is 5K, a 5K year customer. You're actually not going to have anything that where you can spend $5,000 to get a $5,000 customer. You're going to have a lot of stuff that's viral, that's free, that's word of mouth, that's people telling their friends. The marketing is close to zero. And then frankly, your average customer is going to cost you like 10 grand to get five grand. And if they stay five years, you're ahead. If they refer their friends, you're ahead. If you steal it from a customer, you're ahead. If you hit your plan and raise the round, you're ahead. But all of these marketing programs are too expensive. And so if you view them too simplistically, you just don't market. And that's what people are doing. They're just doing nothing and it's going to fail them. Instead, they should be doing the best they can with the budget they have.

• 17:02Harry Stebbings?

  If we put on the head of a sales leader or a founder, when we think target setting, how do we do target setting in a market like this where there is such volatility and uncertainty?

• 17:13Jason Lemkin?

  Yeah, and I think this is where there's a lot of burden on CEOs. And CEOs have to be the adults in the room and they have to do what they're right. Way you gotta slow down. First of all, you have to look at your trailing velocity. You have to look at your last three to four months, average the growth rate, average the burn rate. And that's who you are. Whatever you've been growing or burning last week, even if you want to be a different person, even if you don't like how you look, that's who you are, the average of your last three to four months. And that's your base plan. And then you have to calmly sit down and say, hey, if I don't like that, how do I do better? And be realistic about it. You can only inflect a curve so much. Let's say last year you were growing 200%, but for the last four months, you've only been growing 20%. That's your average growth rate. That's you today. And if you go to your sales team and say, we're going to get back to 100 by the end of the year,

• 17:55Jason Lemkin?

  you may destroy the team. You have to take that trailing three to four months average and gradually scale it up to something that is sane. And you have to importantly, do it with the burn rate. I think we've gotten better the last couple of months. But people that don't do this on the burn rate are still going to drive their cars right off the cliff this year. One of the big mistakes you're seeing there, Jason. The biggest mistake I've seen, which probably twofold, the number one is not enough sensitivities to models. This got people in trouble last year, but it's going to hurt again this year, which is that if you miss your growth plan even by a smidge, it can dramatically increase your burn rate. People do not build sensitive enough models. If I've hired all this headcount and they don't hit the number, but I've incurred all the expenses for that headcount, my burn rate often is materially higher than I think. So people don't build the right sensitivity analysis to when they underperform.

• 18:39Jason Lemkin?

  Either you have to have a great model or what you have to do is build a worser case model, right? Where you miss the plan significantly and you're stuck with a certain amount of expenses and just understand what your burn rate is. That's the biggest problem I see. The second one is there is still delusion out there on the odds of raising a later round. There's still delusion across all of the markets. I still anger founders when I bring it up. I still get toxic comments, but you just have to assume absence, evidence, you're unfundable. Go get a term sheet or just go get someone you trust to tell you, hey, Harry, if you hit 10 million growing to these numbers, I will write you a term sheet. Go prove me wrong, but assume you are unfundable. I'm going to write a small check into a great second time founder that had a multi-billion dollar exit.

• 19:23Jason Lemkin?

  And I was talking to him this week. I'm like, what's your plan? And he's like, he's going to raise a pretty small amount of money in this first round. I'm like, I think you need more. I mean, you've Built a huge enterprise before he's like, I'll just go raise the A or the B later this year. I'm like, oh, my friend, you've been out of market. Raise it all now, raise every dollar you can get now.

• 19:39Harry Stebbings?

  Is that what you would say, raise it all now? Cause this is the other question. But then a lot of people say, well, actually, you know, now is the worst time because now everything's uncertain. It may be worse later, but it will probably be more certain or maybe more certain. Now it feels like kind of.

• 19:53Jason Lemkin?

  You don't think? I think things are settling into certainty. I think they were uncertain at the end of last year. I think we've had crummy multiples in the public markets for three quarters now. And I think has reset what they want to do in a world where to simplify in SaaS, we're dealing with 5X ARR world. But I think people do have a thesis now this year. I think they've settled on a thesis on they've adjusted that we're in a 5X ARR world. And they've decided what's their worldview around that? Will it stay? Will it recover? Will it recover a little bit or will it get even worse? Different views out there. This morning I got a first growth offer of 2023 on a portfolio company. And it was interesting. They were aggressive. I would say 90% of growth, I don't know what you see. You have, you might see more than me. I would say 90% of growth investors are mostly out of market. They're not actively investing, but some are.

• 20:37Jason Lemkin?

  Some either want bargains, which I'm not sure exists, or they're making a bullish bet. And this one actually was an offer at 15X ARR, which was interesting. Said that this is what we will do for a top decile company. Okay, this was their thesis for the best ones, not for any company, 15X ARR over a hundred percent. Don't want to take any risk, right? Depending on the stage, 50 to 100% growth and profitable or close. That's the kicker. Profitable. So they'll take the ARR risk, the 15X. This is 50 million and above, 50 million ARR. This is their thesis. They'll even actually take a little bit less growth, but it's gotta be basically profitable. That's their thesis, which, and there's logic in that because they're saying there won't be another check probably.

• 21:12Harry Stebbings?

  Do they have late profits? Do they have protection on the downside? Cause I think this is the other thing that people forget.

• 21:16Jason Lemkin?

  It's a different issue. Actually personally, don't think any of that stuff matters. We could talk about it.

• 21:20Harry Stebbings?

  I think it does for employees because they see the numbers of a $1.5 billion valuation. But if it sells for 500, your growth investors will still be made good because they only raised 250. But for you as employees, you'll be underwater.

• 21:32Jason Lemkin?

  If you join a company with 2023 with a valuation over a billion as an employee, you're going to make nothing. It doesn't matter what it sells for, you're going to make nothing. There are no hundred. Billion dollar outcomes, you are probably not joining Microsoft or Adobe or whatever. And those took forever. There will be an occasional Figma and that's why we invest. But what are the incredible ones? What are the Hashy Corp's worth? What are the Git Labs worth? These are not worth 15 or 20 billion dollars. You will make nothing. So don't worry about your equity when you join a unicorn. Last year, joining a unicorn was a smart play. Today, if you care about equity, it's a sucker play. You're not going to make anything. You're not going to get any RSUs and you're not going to make anything.

• 22:05Harry Stebbings?

  Hashy Corp's five and Git Labs six now.

• 22:08Jason Lemkin?

  Yeah, those should be 20 billion dollar companies, Harry. They should be 20 billion dollar companies.

• 22:12Harry Stebbings?

  Where's the injustice there? I don't understand. When you say they should be.

• 22:15Jason Lemkin?

  I don't know. I just, I, this is the problem of a seed investor. You have very passionate views about these companies, but how can Hashy Corp be at over 500 million in revenue? Growing, what, what the heck is it growing? Over 50%? How can it be worth less than 10x? These are generational companies. Git Lab and Hashy Corp are generational companies. And the truth is, it's very hard for most employees to make money on anything that doesn't have a 10 billion dollar plus outcome. It's very hard to get rich as an employee.

• 22:40Harry Stebbings?

  One, do you have anything about dipping into public markets? You are an OG of SaaS. You look at the essence, you generate. Why are you not just aggressively deploying into your Hashy Corp's and your Git Labs?

• 22:49Jason Lemkin?

  Well, I think if you interview somebody, think folks have, Iconix and others have done a lot of crossover investments into the best ones. For me, I have done a tiny bit, but I think it's a, personally, I find it a distraction. We started this conversation and we talked before we started about finding more gems, startups. Anything you do that takes you away from that kibbit scene in the public market, it's not worth it. Let's step back. As hard as things are, Harry, there is a magic in a solo GP practice or maybe a two GP fund, which is. Venture is so hard, but good God, Harry, if you're a solo GP and you own 10% of Git Lab today, you make a hundred million dollars yourself. I don't want to screw around with a few shares of Okta or Hashy Corporate. These are companies I love. I don't even want to screw around with a lot of shares of them.

• 23:31Jason Lemkin?

  If there's any chance I can find another talk desk or Algolia or Pipe Drive or Salesloft, or if I can find a Git Lab or Figma, like. You should drop everything. If you have a chance of investing in even one of these deals, you should drop everything and do it. The first time I ever worked with a VC, forget about anything in venture, this is what I learned. I was with my mentor. And he's, here's this VC of a guy that was what's now IBP. When he finds one deal, he drops everything. We were visiting a public company that had IPO'd, it was worth eight billion. And he did one deal a quarter and dropped everything. That's the answer. And so when I see VCs on Twitter talking about how they're looking at buying some shares of Shopify, honestly, I think they're losers. I can go find the next Shopify. Ventures is so hard to make money, but if you're privileged enough to be able to write a significant

• 24:14Jason Lemkin?

  checkbook, you're not going to make as much money as a CEO, but you can make a lot of money, but it's hard. You've got to find the next Shopify. But God, it's a gift, so go spend all of your time doing that. Stop screwing around and to put it all into QQQ or VTI.

• 24:26Harry Stebbings?

  We mentioned that pricing of some great assets like GitHub and HashiCorp. What about the three to $10 million ARR companies last year? Who were valued at 100x ARR? I've got one that was 1,000x ARR.

• 24:39Jason Lemkin?

  Yes.

• 24:39Harry Stebbings?

  What happens to those companies in this market? Do they just ride out their massive runway?

• 24:44Jason Lemkin?

  Well, first of all, it really depends on the founders. I have two companies I've invested in that are doing okay, that have a decade of runway. That's the first time in my lifetime that could happen. Where you can get so much capital that you could have a decade of runway and you could just fart around and do whatever you want.

• 24:59Harry Stebbings?

  Do you mark them down to your LPs? One and two, do you say to them, you've got a decade of runway, give cash back?

• 25:05Jason Lemkin?

  I've marked down only one because if you're growing at a decent rate, I don't know that a markdown at the C level helps a lot if the company is growing. I think if the company is stale, it makes a lot of sense to mark it down. But I only have one portfolio company that's not really growing and that one I did mark down, or maybe one and a half, I would say. I would say there's two. If you're not growing, I think it makes sense to mark it down. If it's growing at a decent rate, if you're not fidelity or a late stage investor, I think it's a waste of your time to mark up or mark down because I asked all my LPs this question. They said if it's growing, they don't care. But I don't think that's the question you ask at the beginning is what's going to happen to these folks. Tried to summarize my thinking actually today in a tweet, which is in the old days, before 10 million in ARR, you could only raise 5, 10, 12 million. And so you sold your company for 100 million, which is still very hard to do.

• 25:50Jason Lemkin?

  There are not that many 100 million dollar exits, even in the best of times. But everyone makes money. This is my old SaaStr rule. If you sell for 10x or more than you raise, it's all pretty good. It gets worked out. You can work out the valuation, you can change this, right? But when you raised massive amounts of money early, how are you going to sell for 10x what you raised? Who's going to buy you for $500 million? You're dead. And I don't have an answer for these ones. I think that they, the best answer may be to combine with a competitor and build some sort of critical mass with your combined revenue. And capital streams, but I think it's sad. I wish I have a lot of answers, but exits are rare. They're really rare and VCs don't talk this way and Twitter doesn't talk this way. They're very, very rare. In all my startups as a founder, I only had a handful of true M and A offers that were decent, only a handful, only a handful.

• 26:34Harry Stebbings?

  It's what I found funny though with the last couple of years is just the amount of times you're like, I don't know if it's a $50 billion company, but it's definitely a $10 billion.

• 26:42Jason Lemkin?

  Yeah.

• 26:42Harry Stebbings?

  The amount of times I'm like, it's definitely a 10 and you're like, 10 is fucking big. I do want to go back to you said about, hey, if you join a company at over a billion, you're not going to make money. Question then, are we going to see this great resignation away from those super overvalued companies? And they're going to start new companies and it's going to be this glorious age of innovation with this talent. Or actually are they going to go, I might not make any money on my equity, but I'm paid. Okay. I haven't been laid off. Security is really important.

• 27:09Jason Lemkin?

  I think that everyone that says that this is going to lead to a wave of new innovation. I think there's some truth to it. Don't get me wrong. Anyone that's been doing this more than five to seven years forgets is that the typical tech worker would say is nothing like five to seven years ago. When I started in tech, you had to be crazy to do a startup. When I told my dad I was doing a startup, the first time just joining one, they said, go do it, but it's a terrible financial idea. And I went through the math and how it works is it's such a, let's say I'm taking a 50% salary cut. Everything goes right. Someday after all these years, I might make a million dollars, but divided by this many years, he says, this is a terrible idea. He said, but go do it. So first of all, you had to be insane. And then as things got a little bit bigger, I kind of had to be just kooky to do a startup.

• 27:47Jason Lemkin?

  Not a founder, but just to join one, you had to be a romantic. You had to be one of these people that's like, I just can't fit in at an Adobe or Microsoft or whatever. And then startups sucked so many human beings into it. Thousands of SDRs, thousands of AEs, thousands of, of marketing managers and social media strategists. That these became just highly paid, ordinary jobs. And I don't think any of those people are going to go off and start the next big one. I think they're going to continue to look for a job. They can kind of phone it in and make a lot of money. Tech went from a risky, terrible paying segment to best risk reward segment in the economy for three years, for three or four years. It was such a good deal. Come out of college, be handed a whole bunch of warm leads at the peak of the pandemic and make 200 grand in sales.

• 28:28Jason Lemkin?

  This is an insane world. Publish three TikToks a week and make 140. I don't think we're going back to that. And I don't think those people are looking to start a Figma. What will happen with that dislocation is remains to be seen.

• 28:39Harry Stebbings?

  My worry is that actually, I think there's this generation of kind of entitled, but also pretty crap team members that are also terrible.

• 28:46Jason Lemkin?

  This is a triggering topic, but the quality plummeted as we hired mainstream, normal people. The quality plummeted. Any leader will tell you this quietly. Mark Benioff said it last week. Like they'll tell you the quality went down the last three years. Way down.

• 28:59Harry Stebbings?

  Do you meet the broader team? Cause like actually when you're investing in companies, I mean, you're investing in a company, not in a founder, to be clear. You are a shareholder of the company. So do you meet those head of marketing? I meet some head of marketing that sponsors the show, Jason, and I'm like, that was terrible. I would never have invested in your company if I'd known you were head of marketing.

• 29:17Jason Lemkin?

  I don't meet with the whole team because usually there isn't much of a management team. I do for sure always spend a lot of time with the CTO. This is my cheat. I view the CEO as the proxy for sales and marketing. Get the CEO is great with some help. Maybe you and I can, we're working on a search together. The other day we can help you find a sales and marketing leader, but I don't really care who you have at 100K in AR or 1 million. You are that person, but the CTO is the product usually. So that's, I think, the mistake 90% of VCs make is they haven't built product themselves. They don't even know how to talk to a CTO or a technical co-founder, and I find them the funnest conversations. So that's as far as I usually go. But when I've invested at the edge of A, I certainly do.

• 29:56Jason Lemkin?

  And I remember when I was starting investing, there was a founder I really, I just liked him. I knew him. He was so charismatic and they had pretty good traction. And I went and it was great. I kind of wanted to do the deal. It was cheap. Always a good sign in venture when it's cheap. Love a good deal. Love a good deal. And I went up and I met with the VP of Sales. I'm like, how is it going? He's like, I'm quitting because we're not going to make it. I'm like, okay, this is learning. Next, bring in the head of marketing and the head of marketing is, yeah, I was like the office manager until recently. I don't know a lot about marketing. Okay. I did. I said to the CEO before I left the office, I'm like, listen, I'm not your Hail Mary. So I do that. And I reflect a lot on this today is you do have to be careful with the bullshit artists. So I don't know if you need to meet all the management, but you gotta talk to enough people, I think, to push through the artists. And I think the bullshit artists really benefit. From the boom, they really did well from less scrutiny.

• 30:41Jason Lemkin?

  It's not just Sam Bike Man Fried or however you pronounce his name. They're all over the place in SaaS and cloud. And you've got to meet enough people to make sure that you're not investing in the bullshit artist.

• 30:50Harry Stebbings?

  Can I ask, one trend that I'm seeing now is given how tough it is, just bluntly.

• 30:55Jason Lemkin?

  Yeah.

• 30:55Harry Stebbings?

  The mature founders, the fathers and the mothers, and the more mature minded of weathering it well. They know that if their child gets sick, it's going to be much worse than a recession. But the young founders, their volatility is very extreme. In the highs, they're selling secondaries and buying Gucci's. And in the lows, they're absolutely on the floor. And I'm really seeing the power of the mature founder and gravitating towards them. Are you as well?

• 31:21Jason Lemkin?

  Let me answer the question differently. I think we have to be careful in tougher times what we take comfort in. It's like taking comfort in a low burn rate. Hooray, I call this a strategic retreat. If you do a brief strategic retreat as a startup, it's fine. Take a quarter, get your house in order, get rid of that terrible VP, cut your burn rate. But if you stay in strategic retreat for a year, you never pull out of it. This is what I see happen too often over my decade of investing is, and this is what I worry about today. I worry about strategic retreats. If I see a founder that's young and very passionate and they're struggling, I can try to help them. But if they cross that line into full strategic retreat, I lack ideas. The seasoned folks, they know what to do that second. I remember going back in time in March 2020, when we had to cancel SaaS your annual the night before. We lost $10 million. Okay. My team was all first timers. They were devastated, Harry.

• 32:05Jason Lemkin?

  They worked for this on a year and we lost $10 million in one night.

• 32:07Harry Stebbings?

  We devastated.

• 32:08Jason Lemkin?

  Took me about 15 minutes. I waited, I saw this happening. I saw the first ship come into San Francisco with COVID on it from this tour ship. And then I fought it, I fought it. And then the moment came when the fight was over. Santa Clara County said, there's no COVID here in the Bay Area, but we're shutting down larger events. And so I just called it that day and the team was, I'm like, okay. And it took me about 11 minutes, maybe five minutes to be your adult. Because I'd seen this playbook before. It didn't even bother me all that much because I had to go into fix it mode. But I don't know that makes me a better person or better. First time founders are so powerful. They're so powerful by the same time. They both have superpowers.

• 32:41Harry Stebbings?

  It does make you better. It does make you better because I think for me, it's like the only thing that matters. And Jason, why am I successful? It's not because I'm fucking smart. We both know I'm not. I'm just dogged and persistent. I know it's not. I just kept going like you there. When you had the shit of shit, you went, okay, let's carry on.

• 32:57Jason Lemkin?

  Yeah, I think that's good. I just think not to sound like fuddy duddies or to talk about the laziness that's gone into tech. I think that's true, but also I worry today that too many seasoned folks just quit too quickly now. They're just waiting for that easy job. They quit, they're jumping, they're jumping. And startups are meant to be hard. They're meant to have these hard periods. But yes, new founders, young founders, the emotionality in the downturn can be, I'm not sure I'm compatible with it.

• 33:21Harry Stebbings?

  Jason, we're both being fund managers. What happens to LP markets in this time?

• 33:25Jason Lemkin?

  You mean with new managers or re-ups or secondaries? What do you mean in the question?

• 33:29Harry Stebbings?

  Let's do first new managers and then re-ups.

• 33:32Jason Lemkin?

  Well, I can just tell you what I've learned with my LPs and I'm a small, a very small for my LPs, but I have a lot of good commonality. I have a lot because of Alex Bengesh, I have a lot of overlap with initialized, with atomic. We have a lot of LP overlap. So I think what I've learned is interesting. One, none of them want another manager. They don't. Okay. It's not that they won't take another manager in, they will. If you or I sent one of them an email and said, this is the best new fund on planet earth, they will probably write a check. No one wants another manager. Simple answer. And two, they're pretty chill right now. The LPs that have been doing this for a while, I've heard versions of this from three or four top LPs, which is, we still believe fundamentally this is the best asset class in our portfolio. And this is part and parcel of the asset class.

• 34:11Jason Lemkin?

  Now, if this went on for five years, they might reassess whether timber or diamonds or ventures should be in the portfolio. But right now people are pretty chill with it. And the last insight, which I didn't totally get until my last LP meeting, which was just a few weeks ago. A lot of LPs are judged on an annual basis or judged annually. And last year actually was great for a lot of LPs because I didn't get this. But the last big exit I had was SalesLoft, which sold for two and a half billion to Vista on December 31st, 2021. But by the times the LPs got their distributions, especially from IPOs, they're deep into 2022. You may be skeptical, this is what I've heard. A lot of LPs may be worried about 2023 when they may have no distribution.

• 34:49Jason Lemkin?

  But 2022, even if the stock market was down, cash in many cases was pretty good compared to model because of the lag, the cash collections lag.

• 34:57Harry Stebbings?

  Okay. Could our saving grace for 2023 be the distributions from Figma? When you look at the amount of LPs across the different funds from Kline to Index and everyone in between, there's a lot of LPs in that. That's a lot of distributions.

• 35:11Jason Lemkin?

  I think there's so much money in venture now. I would need someone smarter than me to throw together a spreadsheet to say, is it enough? So how much did Figma sell? Figma generated 10 billion of venture returns out of 20, let's say. Is that enough compared to the size of the funds in Figma? It might not be enough. Going back to the start of the conversation, venture is a hard business. If that 10 billion represents sort of 50 billion of funds in coverage, it's helpful, but it's not going to rain.

• 35:36Harry Stebbings?

  I think we'll see the death of many of the micro funds, the funds that raised from founders, public market founders who now have had their net worths crushed. And then GPs like me and you, who bluntly are probably writing less LP checks than we did before.

• 35:48Jason Lemkin?

  I think they're, I think they're going to be decimated. I think they already are decimated and they don't know it. I think the last two years were insane and kudos to everyone that raised every new a manager with absolutely no track record, no exits. I'm sitting on likely a 1X portfolio at best was able to raise double digit million first time fund. Kudos to you because that never happened in venture before. When I raised SaaStr Fund 1 in 2016, we knew each other then. I still have some of the testimonials on my website. People thought it was insane. They're like, how could one person raise $60 million? That's so much money. By then it was still early in my career, but I already was almost 4X from real companies with significant ownership positions. I'm not like throwing a check into something. I hope that the new managers know that it's a gift and I hope that they leverage that gift.

• 36:30Jason Lemkin?

  Because you can make so much money in venture if you invest extremely well, but investing at a mediocre level only gets you fees. You're a new manager with a new fund. Don't waste your shots. I think we all wasted a few shots the last couple of years. I know I wasted one or two. I wish I could get them back. I didn't waste 20. But times were so good, I wasted shots. Maybe don't waste a shot if you're a new manager. Just assume this fund is your last one, but one Figma, one HashiCorp, you can make a lot of money. You don't think so? You don't think you can make a lot of money on one?

• 36:56Harry Stebbings?

  Oh no, I totally think you do, but do you know you're winners early? For those that are, they're Figma's and the HashiCorp's or the SalesLofts or the Algolias.

• 37:02Jason Lemkin?

  Yes.

• 37:02Harry Stebbings?

  Gorgeous. Do you know it early or are you ever surprised?

• 37:05Jason Lemkin?

  I think you know that they are operationally successful early. You know that they're going to grow. I had no idea that any of my cash unicorns, the ones that were exited for a billion. I didn't think any of them would, except for Talkdesk. And it's not that I didn't love the founders. It's just so hard that I wouldn't. Not have predicted that pipe drive, algalia, sales loft would get that big. I do talk to us with just because going from one to 15 million with so few employees in a year was so much product market fit in the other year. Okay. Well, this is going to be worth a billion, but not more, not the 10 billion on paper. So I think the meta learning is just get into winners and just don't worry about the stock market. Don't worry about multiples because you can't control it and it's going to change so many times. It takes 10 years to get a billion dollar exit like M and A, IPO can raise 10 years for.

• 37:49Jason Lemkin?

  So the market's going to change a lot in 10 billion. You don't even need to look other than to understand follow on capital and burn rates. Just do it. I do think if you're able to invest post revenue in SaaS, you know, it's going to do reasonably well and you also know it's probably going to have a crapier in there.

• 38:03Harry Stebbings?

  I definitely have a sweet spot of I like, but post product 20 to 40 K in revenue. You have some customers, you have some data, the founder is probably still leading the sales process, but there's something there. There's that seedling of goodness.

• 38:15Jason Lemkin?

  You know, the truth, that's where I started investing because I was like, I'm a founder. I need to invest at least at a moment in time where I can tell if they're a better founder than me. And so I needed a little meat on the bones and you're a founder now, Harry. So you know who's better than you as a founder, not just investor. So founders have this investing superpower that money managers don't have, which is they know who's better than them. But if in SaaS and B2B, if you do that pre revenue, you really can't be sure.

• 38:37Harry Stebbings?

  Jason, what happens with re-ups? They don't want new managers. Are they re-upping?

• 38:41Jason Lemkin?

  I think that if you have done reasonably well as a manager, you are still earmarked for the next fund. I think you are still earmarked, whether you will get it and whether you will get it in the same amounts, the way you want. I don't know the answer. I know that other than one LP, I remained earmarked, one LP D earmarked me. That was a learning process, but I know I'm earmarked. It doesn't mean I might not get any more money, but I know that I'm but the budgeting process for LPs, like I'm on the other side, it's really complicated between capital calls and timing and managers. It's not a simple process. You have to plan the science out of it. Otherwise you're going to get hit hard. It's so many capital calls over so many years and so many managers.

• 39:15Harry Stebbings?

  Why did they DM Marky? Did they tell you?

• 39:17Jason Lemkin?

  I think they felt I was investing too slowly and wanted to invest in more in crypto or a hotter manager, they said.

• 39:24Harry Stebbings?

  A lot of you're investing too slowly. Well, you don't want vintage diversification in this cycle. I agree with you because I invested 35% of my fund in. 17, 18 months, my LP are going, that's fantastic news. This is great. Unlike every other manager, you deployed slowly. Good.

• 39:39Jason Lemkin?

  There is a certain amount of pressure to deploy capital, but LPs, they're dealing with large pools of capital and they want expected risk. They don't want the unexpected risk. That's what freaks them out. There's this one fund out there, which we won't name names, who raised their huge, I think it's their third fund, and they called 95% of it at the peak and put most of it into some of the hottest crypto names, a well-known fund. And my limited understanding from the limited overlap is that the LPs did not expect 95% of their fund to be called in the first year.

• 40:06Harry Stebbings?

  On the reabs, from what I understand, and I speak to a lot of LPs, if you had the chance to produce DPI last year and you didn't, you're in the bad books. If you deployed way too fast and left them very surprised on your deployment cycles, you're in the bad books. But otherwise, if you stuck to plan and you actually prioritize the relationship, this is where, I love people, you know me. If you did build the relationship throughout cycles and didn't just take money and say fuck off, and you stuck to plan, they should be there, but likely in the same non-expanding capacity where they would have expanded normally. Do you see what I mean?

• 40:38Jason Lemkin?

  Someone great on Twitter said the ultimate LP judge was how many exits did you have in 2021? So I'm new, but I did have $3 billion cash exits in 2021 in my investing career, but I didn't make those investments in 2021.

• 40:51Jason Lemkin?

  So if I hadn't started investing, I didn't have any like B to C stuff. If I'd invested early, I would have zero instead of these good-looking cash. It's tough because there just wasn't enough time for all, but unless you're in these super-hot deals to create those cash exits, you probably are sitting on no DPI. It doesn't mean your investments are bad, but it's just that's a time trouble, is that there is secularity there. I think it's a very important question for LPs to ask is not just the fund, but the GP. They should ask, if you didn't have multiple billion-dollar cash exits in 2021, you're not a good investor. I saw that on Twitter and it struck me as painfully true. As a GP, if you've been investing more than six or seven years and you didn't have multiple billion-dollar cash outcomes in 2021, at the best, because it was just so accelerated, you never will. The LP should just quit on you.

• 41:33Harry Stebbings?

  But I finish on a quick fire, my friend. But if we look forward to the next year, December 2023, will it be in better or in a worse? Place than we are now.

• 41:42Jason Lemkin?

  First of all, seed investors are optimists, I think, and I'm a founder and founders are optimists. Based on all the downturns I've been in, the 2016 flash crash, which we don't talk about enough in SaaS because it was terrible when multiples fell to 2X, 3X from the global meltdown in 2008 to 2009. I have learned again and again that things are brutal. They seem to move in slow motion and then they come back pretty fast and they're never quite as bad as we thought. So I find it very difficult to believe that when we see Okta growing 40% at 2 billion, when we see the type of growth we see out there, that we will have these multiples. When the Fed gets through whatever the hell it's going to do and we get on the other side of this, I just don't believe that we will have multiples that are just this low in the public market.

• 42:24Jason Lemkin?

  Now, I'm not a DCF guy and I'm not going to talk to you about free cash flows in 2084. I'm just a meat and potatoes SaaS guy, but I've never seen multiples this low when businesses were this good. I've only seen multiples this low when businesses were struggling or shrinking like in 2016, when literally they were shrinking. And so I'm pretty bullish at the end of this year. I'm bullish that multiples will be up somewhere between 20 and 40%. And I believe that will lead to a rush to deploy capital. But for founders, you have to understand that will never lead to a return of 2021. Buyers will be back, CIOs are still increasing spend next year. We're going to get through a lot of things, things will be at the end of the year, but we will never, for founders that have only been in market or founders for three or four years, realize that you lived in insane times. They will be better at the end of this year than they start, but the world will never work the way it worked before.

• 43:09Jason Lemkin?

  We can't have ADX error, public company multiples are not coming back. We're not going to see Zoom go from one to four billion in one year ever again. This was a generational thing for us, right? It's not going to happen again. There's a lot of advice, which is wait till the markets thaw. It's not that simple, man. They're not coming back. They're not bouncing back to 2021. They're not bouncing back to good times. They're just going to get a little bit better. But there's no thaw. If you can't raise any money at all today, like if you're unfundable, I don't think you're going to be fundable at the end of the year. Okay, if you're fundable today, but you don't like the metrics, you don't like the valuation, you double the end of this year and you see some multiple recovery, you're going to be pretty happy at the end of the year. But if you're unfundable today, you're going to be unfunderable even in a recovery. Do not wait for this magic moment when air quotes. The markets recover because it doesn't exactly work that way.

• 43:54Jason Lemkin?

  Right. The bar is going to remain high to be fundable for a very long period of time, especially Series A and B and later, it's going to remain very high.

• 44:02Harry Stebbings?

  What have you changed your mind about in the past 24 months?

• 44:05Jason Lemkin?

  I've spent the last 24 months relearning the unicorn lessons, relearning that companies I thought would never be unicorns became unicorns, that sociopath CEOs became unicorns, that bullshit artists became unicorns, that folks that did not have an extremely strong understanding of the market became unicorns. And I felt like an idiot, as many of us did. I felt like an idiot not investing in a bunch of these companies where I just, I couldn't see it. I couldn't see that they would become a unicorn. So now I'm relearning this lesson and I think the lesson I'm learning is no cut corners and that the bar is just insanely high and so it should be. So I don't know, I'm still redigesting the fact that we learned so many lessons for 24 months and now we got to quickly unlearn them because we turned out this stuff was hard. It's all hard. SaaS is hard, startups are hard.

• 44:50Jason Lemkin?

  It's meant to be hard and I'll tell you my last little bit of lack of sympathy, but you talked about new founders being emotional. When I see like a founder cry, I have no sympathy. And I know someone's going to listen to this and be mad, but it's supposed to be hard. Like you cry a little bit with me, like Harry, you and I can cry, we can end this, we can cry a little. I don't mean that literally, but adult up. I mean, this stuff is hard, right? So that's what we're learning. It's hard. It's meant to be hard. You should have a terrible year. You should almost run out of money. Like I bet if you went back in 20 VC and you looked in the early days, almost every top founder I knew almost ran out of money, but they didn't. They almost all had that great story, right? You get them on stage, outside of the last two years, you get anyone on stage, you know, we were three weeks away, we had to meet 7,000 investors and we only got one. And those stories kind of evaporated, but they're all going to come back.

• 45:33Harry Stebbings?

  My personal favorite, I got an investor update the other day. It said, "The good, amazing team offsite." I was like, when that is number one.

• 45:40Jason Lemkin?

  Oh, yeah.

• 45:41Harry Stebbings?

  We're still not good. It's still not okay. Jason, I love this. This has been fantastic as always. I think it's so helpful for fans understanding going into the year. So thank you so much, my friend. It's wonderful.

• 45:51Jason Lemkin?

  Okay. Thanks, Harry. Best of luck to you and everyone in the audience in 2023. Let's, this year is gonna end better than it started, so take advantage of it.

• 46:00Harry Stebbings?

  As always, I so appreciate all your support. You can find us also on YouTube at 20VC. I always love to see you behind the scenes. You can do that on 20vc.com. But before we leave you today, the single most important element of any team is their ability to work together in the best and most efficient way. Coda is the dock where teams can work on entire projects from start to finish with everything they need, all in one place. Think about the way your team works today. If all the work is spread across different documents, spreadsheets, and a staff of workflow tools like they are in all of my teams, it's tougher to focus on getting things done, let alone getting them done together. And that's why I realised that I had to have Coda and why you need Coda. Coda is the dock that brings it all together by putting data in one centralised location,

• 46:44Harry Stebbings?

  regardless of format. With Coda, you'll never need to ask, "Where are the latest project updates? Anyone know where the performance stats are?" This is what really slows teams down and prevents collaboration. With Coda, your team can operate on the same information and collaborate in one place and get projects done much, much faster. Take advantage of this special, limited time offer just for startups. Sign up today at coda.io/20vc and get a $1,000 startup credit on your first statement. That's coda.io/20vc to sign up and get a startup credit of $1,000. And speaking of tools we cannot live without, you probably know Brex. Brex was the first corporate card for startups, but Brex has grown a lot since then to scale up right along with its customers.

• 47:29Harry Stebbings?

  Now 90% of Y Combinator grads trust Brex as their all-in-one financial stack. I get to speak to founders all day and I know how important having the right financial stack is to their success. With Brex, you get fast access to high-yield business accounts, high-limit cards, and rewards like cash back and billboards to fuel your growth. Beyond that, Brex has the venture debt, financial modelling, and spend management solutions you need to run your startup globally and well. So are you ready to make your future CFO proud? Learn more at brex.com/20vc. That's brex.com/20vc. And finally, of course... When you're in brex make your team work more efficiently,

• 48:11Harry Stebbings?

  Intercom makes modern customer service software that really redefines how businesses support their customers. And their platform connects businesses directly to customers using powerful messaging and automation. Intercom enables teams to scale support without investing more resources, leading to happier customers and more efficient support teams. And Intercom is used to send over 500 million messages per month and enables interactions with over 600 million monthly active end users, trusted by customer service teams at more than 25,000 global organisations, including Atlassian, Amazon and Lyft Business. Check out this amazing offer. Eligible startups get advanced Intercom features at a 95% discount. So do not miss out.

• 48:56Harry Stebbings?

  Head over to intercom.com/20vc to find out more. As always, I so appreciate all your support and we have an incredible episode with Geoff Jordan at Andreessen Horowitz on the show on Monday.