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

20VC: NEW FORMAT: Mega Funds Will Come Back, Why Markups Have Corrupted VC, Why RIFs Should Always Be An Embarrassment To SaaS Founders and Why Pitching is BS and Fake with Jason Lemkin and Rick Zullo

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Aug 23, 2023

Jason Lemkin, Founder of SaaStr, and Rick Zullo, Co-Founder of Equal Ventures, dive into the evolving landscape of venture capital. They discuss the potential resurgence of mega funds and why the unicorn craze is fading. Jason emphasizes that founders should be embarrassed by layoffs, pointing to a need for efficient growth rather than mere revenue spikes. The duo also critiques inflated valuations and stresses the importance of transparency in investment decisions, showcasing lessons from their experiences in the ever-changing startup ecosystem.

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INSIGHT

Unicorn Investing Declining

Unicorn investing is becoming less relevant for larger funds.
They now prioritize $10B+ outcomes, making $1B exits insignificant.

INSIGHT

Prioritize Runway

Founders should prioritize not running out of money.
Taking more funding at a lower valuation can be beneficial if managed well.

ADVICE

Avoid RIFs in SaaS

Founders should avoid RIFs in SaaS companies with recurring revenue.
It signals a failure to plan and adapt to market conditions.

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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.

Rick Zullo is the Co-Founder and General Partner at Equal Ventures. Prior to co-founding Equal Ventures, Rick was an investor at Lightbank, Prior to Lightbank, Rick worked with investment firms Foundation Capital, Bowery Capital, and Lightview Capital.

In Today's Episode We Discuss:

1. Why Venture Capital Needs It's Jerry Maguire Moment:

Why does Rick believe that VC needs it's "Jerry Maguire" moment?
What needs to change? What needs to stay the same?
Why does Jason believe we will see even more mega funds in 2024 and 2025?

2. Unicorns are So 2019:

Why does Jason believe that "unicorn investing is mostly dead for bigger funds and none of them are looking for a $1BN outcome anymore?"
Why does Rick believe that multi-stage fund investing at seed simply does not make sense?
What does Rick believe many founders need to know when they take multi-stage money at seed?
Of the over 1,000 unicorns created over the last few years, how many of them do Rick and Jason feel are actually unicorns today?

3. Efficiency and Growth: We Need it All:

Why does Jason believe, as a founder you should be embarrassed if you ever had a RIF (reduction in force)?
Last year many founders got a pass on growth as they were more efficient. Is that pass over? Do they need to get back to growth?
What is the single biggest reason that companies do not scale from seed to Series A?
What happens to the many companies with years of runway but no product-market-fit?
Are we entering a new age of efficient company building or will we go back to high burn environments and excessive spending?

4. Entering the World of LPs:

If Jason and Rick were to advise LPs today on how much to discount the value of their venture books, what advice would they give?
How have markups completely corrupted the venture ecosystem?
How does LPs being incentivized by paper-marks make the industry even more screwed?
What are the single biggest misalignments between GP and LP?