E182: Lessons from 17 Years at Menlo Ventures and Accel w/Tyler Sosin

Jul 2, 2025

Tyler Sosin, a Board Partner at Menlo Ventures and now the founder of Villain Capital, shares his insights on investing in tech-driven businesses. He discusses the importance of durable customer relationships and misconceptions around Total Addressable Market (TAM). A strong advocate for vertical software, Tyler emphasizes the value of niche markets and the balance between aggressive growth and sensible compounding. He reflects on past investments like Flywire and Carta, drawing lessons on founder resilience and strategic growth approaches.

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INSIGHT

Villains: Long-Lived Market Dominators

Companies that endure decades often transition from heroes to villains with dominant market positions.
Such "villainous" companies display customer lock-in, pricing power, and resist disruption, appealing to rational capitalists.

INSIGHT

Customer Lock-In Drivers

Customer lock-in often comes from habits and cognitive friction in switching.
Financial and habitual lock-in cause customers to resist changing providers despite possible ease of switching.

ADVICE

Early Signs of Strong SaaS

Look for early signs of annuity-like revenue in vertical software with sticky customer relationships.
Ensure founders efficiently sell recurring products and have a plan for customer expansion.

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In this episode, I speak with Tyler Sosin, founder of Villain Capital, a new fund focused on investing in vertical software businesses. Having grown up in the venture business for 17 years with storied firms Menlo Ventures and Accel Partners, Tyler brings a unique - and perhaps contrarian - perspective to venture investing. With Villain, Tyler's ambition is to help vertical focused founders efficiently scale their start-ups into dominant franchises that can compound their growth and relative market share over decades. The name of the firm, Villain, was inspired by a quote by Harvey Dent, a character in the Batman film The Dark Knight, who said to Batman, “You either die a hero or see yourself live long enough to become a villain.”

Highlights:

The power of vertical software and markets that start small but grow big
Characteristics Tyler looks for in early-stage founders
Misconceptions around TAM and the overlooked upside in niche markets
Why customer lock-in and annuity-like business models matter
Thoughts on growth at all costs vs. compounding sensibly
Lessons from past investments like Flywire, Carta, and Indio
What venture gets wrong about market sizing and competition
How Villain balances elements of both VC and growth equity
The underestimated strength of founders who’ve been burned before

-- Guest Bio: Tyler Sosin is the founding partner at Villain Capital and a board partner at Menlo Ventures. Tyler has a degree in International Relations from Stanford University and lives in New York City.

Our Podcast now receives more than 300,000 downloads a month. Are you interested in sponsoring an episode? Please email David Weisburd at david@weisburdcapital.com.

#VentureCapital #VC #Startups #OpenLP #assetmanagement

-- Stay Connected: X / Twitter: David Weisburd: @dweisburd

LinkedIn: David Weisburd: https://www.linkedin.com/in/dweisburd/ Tyler Sosin: https://www.linkedin.com/in/tylersosin/

Links: Menlo Ventures: https://menlovc.com/team/tyler-sosin/

-- Questions or topics you want us to discuss on How I Invest? Email us at david@weisburdcapital.com.

(0:00) Episode preview (1:37) Peter Thiel's perspective and the role of market power (5:12) Identifying potential villain companies in early stages (8:26) Successful strategies in product bundling and market control (12:44) Venture capital approach to small markets (19:11) Balancing growth and sustainability in startups (24:56) Historical impact and profitability of tech giants (27:37) The importance of collaborative thinking and networking in VC (31:03) Herd behavior and innovation in fund management (34:53) Vertical software companies: PE and growth equity interest (37:23) Debunking market size myths in startup success (42:36) Storytelling and scaling in startup growth (44:15) Strategies for expanding market reach in growth companies (48:56) Career advice from Tyler Sosin's perspective (51:00) The Thiel fellowship's influence on young entrepreneurs (51:40) Closing remarks