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

20VC: Why Small Funds Outperform Large Funds & AUM is a Vanity Metric | Why 99% of Investments in AI Startups Will Go To Zero | Being a "Traction First" VC & Investing Lessons from Investing in Canva and Missing Figma with Nikhil Basu-Trivedi

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Sep 6, 2023

Nikhil Basu-Trivedi, Co-founder and General Partner at Footwork, shares his insights from a successful venture capital career. He argues that small funds outperform large ones, revealing why he views Assets Under Management as a misleading metric. Nikhil emphasizes the importance of 'traction first' investing, focusing on genuine product-market fit over revenue. He also delves into the critical dynamics between founders and investors, advocating for open communication. Finally, his take on the AI startup landscape warns that many will likely fail.

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ADVICE

Act Like a VC

Think of yourself as a venture capitalist from day one, regardless of your title.
Focus on the core VC tasks: find, decide, win, help, and exit.

ADVICE

Embrace Exceptions

Exceptional companies often break the rules.
Be open to making exceptions to your investment thesis for truly outstanding outliers.

ANECDOTE

Canva's Unconventional Start

Canva, based in Sydney with a pre-revenue convertible note, initially broke many traditional investment rules.
Strong early product-market fit signals, like high user engagement and organic growth, justified the investment.

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Nikhil Basu Trivedi is Co-Founder & General Partner at Footwork, an early-stage focused venture firm investing its first fund. In his venture career, he has invested in the early rounds of several companies that have exited or are currently valued at over $1B, including Athelas, Canva, ClassDojo, Color Health, Frame.io, Imperfect Foods, Lattice, and The Farmer's Dog. Prior to Footwork, Nikhil was a Managing Director at Shasta Ventures, on the investment team at Insight Partners, and on the founding team at Artsy.

In Today's Episode with Nikhil Basu Trivedi We Discuss:

1. From Summer Intern to Founding a Firm: The 13 Year Journey:

How did Nikhil first make his way into venture as an intern at Insight Partners in NYC?
What does Nikhil know now that he wishes he had known on his first day in venture?
Why does Nikhil advise all young VCs to "not look at their business card"? Why does title not matter in venture?
Should founders meet with Juniors as well as GPs and more senior people?

2. Small Funds Outperform Large Funds:

Why does Nikhil believe that small funds outperform large funds?
Why is AUM the biggest bullshit metric in VC?
How does Nikhil advise seed stage founders who have offers from seed firms for smaller rounds at lower valuations and are weighing them against larger rounds with higher valuations from multi-stage funds?
Does Nikhil believe that platform value-added services really provide any value?

3. The Art of Investing:

What has been Nikhil's biggest investing win? How has it changed his approach to investing?
How does Nikhil prioritize between people, traction, and market? What is most important?
What has been Nikhil's biggest investing miss? How has that changed his approach?
Does Nikhil believe the great founders are immediately obvious?
Why is market size the single question that keeps Nikhil up the most?

4. The Dysfunctions of Venture Capital:

What are the single biggest areas of misalignment between GP and LP?
What do many GPs see and know well that LPs should know and see more of?
What are the biggest ways that decision-making breaks down in a venture fund?
Why does Nikhil believe that so much of the investment in AI is going to go up in flames?