The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch

20VC: Investing Lessons from FC Seeding Uber, Airtable and Coupang | Why Pro Rata is the Original Sin in VC | Why Liquidity Has Died in 2024 | Why LPs are Pissed with VCs | The Hard Truth About Seed Fund Economics with David Frankel @ Founder Collective

Oct 14, 2024

David Frankel, Co-founder and Managing Partner of Founder Collective, shares insights from his impressive venture capital career, having backed giants like Uber and Coupang. He discusses why pro-rata rights may hurt founders and why Limited Partners are frustrated with VCs today. David dives into the evolving dynamics of seed funding, emphasizing the importance of adapting investment strategies in a shifting landscape. He reflects on the emotional challenges of guiding struggling startups and highlights the critical role of understanding entrepreneurs' characters in successful investments.

01:27:20

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David Frankel

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Quick takeaways

Managing reserves in venture capital is increasingly complex, requiring a delicate balance between supporting existing investments and pursuing new opportunities.

Investors should focus on non-consensus opportunities and diverse founders, emphasizing unique ideas over trends in the current competitive seed funding landscape.

The importance of founder adaptability is highlighted, as successful investments depend on a founder's ability to pivot in response to market demands.

Deep dives

Challenges of Venture Capital Reserves

Managing reserves in venture capital is increasingly complex, particularly with the current landscape of seed funding. Many firms struggle to determine the right level of reserves to maintain, balancing the need to support existing portfolio companies while also exploring new investments. The conversation reveals a shift in mindset where having reserves may now feel more essential than in the past, yet the execution remains difficult. The danger lies in over-allocating to failing companies, which may prevent funding to those with higher potential.

Navigating Tough Feedback in Leadership

03:55

Intro

4min

Navigating Seed Funds in Changing Markets

11min

Navigating Tough Feedback in Leadership

4min

Navigating Pro Rata and VC Dynamics

16min

Navigating Secondary Markets and Investment Dilemmas

5min

Disrupting Legacy Companies: The LEACH Concept

2min

Startups vs. Monopolies: Navigating Challenges

5min

Navigating Capital in AI Venture Dynamics

18min

Navigating AI and Venture Capital Dynamics

18min

10.

Exploring Historical Ventures and Modern Moonshots

2min

11.

Gratitude and Sponsor Highlights in Startup Conversations

3min

David Frankel is the Co-Founder and Managing Partner of Founder Collective, one of the best seed firms of the last decade. David has led rounds in companies such as Suno, Coupang, SeatGeek and PillPack (sold to Amazon for ~$1B). Previously, David was Co-Founder and CEO of Internet Solutions (IS), the largest ISP in Africa, ultimately acquired by NTT Japan. David has been named to the Midas List six times. In 2023, he was #11 and in 2024, he appeared at #15 on the Midas List of the world's best venture capital investors and at #2 on the Midas list of seed investors.

10 Questions With One of the World’s Best Seed Investors:

1. Reserves: Why are reserves the hardest part of venture? What have been David’s biggest lessons in how to do them well?

2. Why does David believe that pro-rata is the original sin of VC?

3. Has DPI died in 2024? Is PE the salvation for the VC exit market and liquidity?

4. Why does David believe LPs are so pissed of with VCs right now? What will change that?

5. When will IPO markets open? Are M&A markets shut? What would cause them to open?

6. How does David reflect on price today? When will he pay up and break his rules?

7. Biggest lessons for David on knowing when is the right time to sell? Why does David believe you should never sell your winners? What has David sold that he regrets most?

8. What companies returned the most to Founder Collective Funds? Uber? Coupang? Airtable? The Trade Desk? What did he learn from those mega hits?

9. What have been David’s biggest losses? How did losing the company change his mindset and approach to investing?

10. What does David believe is the future of venture capital? How can seed funds play in a world of mega multi-stage funds? Who wins? Who loses?

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