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

20VC Roundtable: NEW FORMAT: Why the Seed Investing Model is Broken, How to Make Money at Seed Moving Forward; Who Wins and Who Loses, Why Venture Value Add Platforms are BS and Failed and Why There Will be an IPO per Week in H2 2024

Aug 11, 2023

Sam Lessin, co-founder at Slow Ventures, Frank Rotman, founding partner at QED Investors, and Jason Lemkin, founder of SaaStr, dive into the flaws of the current seed investing model. They discuss its shift from a factory approach to tailored strategies aimed at sustainable businesses rather than inflated valuations. The trio debates the future of party rounds, insights on navigating the complexities of early-stage investments, and the growing talent recruitment challenges. Plus, they forecast a booming IPO market in late 2024.

53:50

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Episode guests

Jason Lemkin

Frank Rotman

Sam Lessin

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Quick takeaways

The seed investing model is broken and needs to shift towards a more bespoke approach that focuses on unique and innovative ideas.

De-risking businesses systematically and efficiently is crucial for successful seed investing, requiring a reset and refocus on de-risking businesses at each growth stage.

There is a growing recognition of the importance of capital efficiency in seed investing, with a focus on building great businesses in niche markets that have been overlooked due to TAM limitations.

Deep dives

The Evolution of Seed Investing

The traditional factory model of seed investing, where seed funds act as the first step in a predictable production line of startups, is no longer effective. This model relied on the ability to manufacture good but not great companies that fit a certain market demand. However, it has become clear that this approach does not produce the desired outcomes in the long run. Seed investments are now shifting towards a more bespoke approach, focusing on unique and innovative ideas that may not follow the traditional factory line. The emphasis is on finding interesting and off-theme opportunities that have the potential for massive returns.

Investing in AI: Betting on Facebook, Amazon, and Microsoft

00:53

Pov: seed $ to De-Risk and resell downstream is dead

01:46

Intro

5min

Evolving Seed Investing Strategies

16min

Navigating Seed Investing Challenges

16min

Navigating the Complexities of Seed Investing

2min

The Recruitment Conundrum in Startup Ecosystems

2min

Navigating the IPO Landscape

9min

Reflections on Support and New Ventures in Seed Investing

3min

Sam Lessin is a Co-Founder and Partner @ Slow Ventures with a portfolio including the likes of Airtable, Robinhood, Slack, Solana, PillPack and many more unicorn companies. Prior to Slow, Sam was a VP Product at Facebook having sold his company to Meta.

Frank Rotman is a founding partner of QED Investors, one of the leading fintech-focused venture firms investing today with a portfolio including the likes of Klarna, Kavak, Quinto Andar, Credit Karma and more. As for Frank, prior to QED, Frank was one of the earliest analysts hired into Capital One and spent almost 13 years there helping build many of the company’s business units and operational areas.

Jason Lemkin is the Founder @ SaaStr one of the best-performing early-stage venture funds focused on SaaS. In the past, Jason has led investments in Algolia, Pipedrive, Salesloft, TalkDesk, and RevenueCat to name a few. Prior to SaaStr, Jason was an entrepreneur, selling EchoSign to Adobe for $100M where it is now a $250M ARR product.

In Today's Discussion on Why Seed is Broken We Discuss:

1. The Seed Model Was Broken and What Comes Now:

Why does Sam Lessin believe the model for seed of a "factory line" was broken?
What does he believe will replace it?
Why does Jason Lemkin argue that this might not be the case for SaaS and enterprise?

2. Round Construction: YC, Multi-Stage Funds and Party Rounds:

Why does Sam Lessin believe we have seen the end of party rounds? Why does Jason Lemkin disagree and we will see more than ever?
Why does Sam Lessin believe the factory model of YC churning out companies is over? Where does Jason Lemkin believe the value lies in the YC model?
Will the multi-stage funds remain in seed? How has their entrance and deployment changed the seed market?

3. VC Value Add at Seed: Is it BS?

Why does Jason believe all talent arms in venture firms have failed?
Why does Sam believe that no VCs provide value?
Do the best founders really need help? Why do Jason and Sam disagree?

4. What Happens Now:

Why does Jason believe that every manager can write off their fund from 2021?
Who will be the winners in seed in the next 10 years?
Why does Sam believe if you want to bet on AI, just bet on Meta or Microsoft?
What will happen to the many companies with no PMF but 10 years of runway?

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

20VC Roundtable: NEW FORMAT: Why the Seed Investing Model is Broken, How to Make Money at Seed Moving Forward; Who Wins and Who Loses, Why Venture Value Add Platforms are BS and Failed and Why There Will be an IPO per Week in H2 2024

Episode guests

Podcast summary created with Snipd AI

Quick takeaways

Deep dives

The Evolution of Seed Investing

The Importance of Efficient De-risking

The Shift Towards Capital Efficiency

Capital efficiency and the importance of proof

Shift towards smaller, profitable businesses

Investing in AI: Betting on Facebook, Amazon, and Microsoft

Pov: seed $ to De-Risk and resell downstream is dead

Remember Everything You Learn from Podcasts