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

20VC: Why VC is a Ponzi Scheme Today | Why Most VCs are Bankers | Why Big VCs Ruin Startups | Why Incentives in VC are Broken | Why American Dynamism is a Tool for VCs to Raise Money with Nick Chirls, Asylum Ventures

Sep 6, 2024

Nick Chirls, Founder of Asylum Ventures, challenges the conventional VC model, calling it a Ponzi scheme driven by misaligned incentives. He advocates for treating founders as artists rather than mere financial assets, emphasizing the need for genuine support over transactions. Chirls discusses strategies for success in 2024, including the importance of investing in overlooked markets. He shares insights from his experiences, such as the advantages of buying common shares and fostering trust between investors and entrepreneurs.

01:00:47

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Nick Chirls

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Quick takeaways

Nick Chirls critiques the venture capital model, suggesting it operates more like a Ponzi scheme due to misaligned incentives and focus on rapid capital deployment rather than sustainable growth.

With Asylum Ventures, Chirls innovates by treating founders as artists, fostering creativity and personal relationships over traditional metrics of profitability in venture capital.

The podcast emphasizes the need for trust and collaboration between founders and investors to shift the venture ecosystem away from competition toward mutually beneficial partnerships.

Deep dives

Capital Requirements of Modern Ventures

The financial model of many junior partners in venture capital firms emphasizes the velocity of money rather than actual returns. This model favors companies that require significant capital investment, leading to the rise of foundation models that attract billions in funding. Large venture firms often prioritize rapid deployment of funds, which can result in inefficiencies as they continuously seek new capital sources. This capital influx can distort funding priorities, encouraging startups to operate in ways that prioritize fundraising over sustainable growth.

Invest in the Unnoticed to Reap Rewards

01:23

Risk and Reward: A Perverse Incentive Structure

01:14

Long-Term Game Over Short-Term Gains

01:50

Take money off the table with founder is

01:42

Intro

4min

Launching Asylum: A New Venture Capital Mission

2min

The Venture Capital Paradox

17min

Navigating Trust in Venture Capital

11min

Navigating Early-Stage Venture Capital

5min

Navigating Venture Capital's Complexities

18min

The Importance of Connections and Trust in Venture Capital

3min

Nick Chirls is the Founder of Asylum Ventures, a new venture firm dedicated to the creative act of building companies; treating founders like artists, not assets. Asylum raised $55 million to invest $1-2 million in early-stage founders practising the art of making startups. Prior to Asylum, Nick co-founded Notation Capital, one of NYC's most successful pre-seed firms.

In Today's Episode with Nick Chirls We Discuss:

1. Why Venture Capital is Broken Today:

Why is VC a ponzi scheme today?
Why are most VCs sheep and have lost all creativity?
Why are most investors today incentivised to get dollars out of the door and not to make great investments?
Why are services functions within VC firms total BS?
Why do no VCs provide significant enough value to a company that it is needle-moving?

2. How to Make Money in VC in 2024:

What are the two ways to make money at seed in 2024?
Why do founders in unloved markets care more than those in hot markets?
Why will large institutions lose a ton of money investing in the large firms of today?
Why does Nick believe VCs should always sell when their founders sell shares?

3. Lessons from 3xing a Fund on One Check:

Why does Nick think about not purchasing preferred shares and only buying common shares?
Why does Nick believe that investing in competitive markets is stupid?
What does Nick believe are the conditions you must accept if you are doing a $5M on $25M seed?

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