The Full Ratchet (TFR): Venture Capital and Startup Investing Demystified

Villi Iltchev of Two Sigma Ventures joins Nick to discuss Using "George" a Proprietary Tool to Source Startups, The Commoditization of Capital, and the New Exit Environment. In this episode, we cover: Walk us through your background and path to VC What’s the thesis at Two Sigma? Tell us about George. What's George's biggest blind spot? What is your decision framework on investments? What characteristics do you look for in markets when identifying new sectors/spaces of interest? How long after investing in/working with a company do you tend to know whether it's going to work or not? Do you attempt to handicap execution risk vs. technical risk vs. commercial risk? Capital is a commodity and, largely speaking, there doesn't appear to be a lot of differentiation in venture.  How do you combat the commoditization of venture? Aside from bankers... who do you think stands to lose the most from the increase in SPACs and direct listings? Any other downsides, unintended consequences, or problematic issues that could arise from the increase in SPACs? A decade from now, will the U.S. be the best country to start a tech company?  If it shifts, what are the prime candidate countries to replace the U.S.? International investment strategy for Two Sigma? Three data points...  hypothetical investment scenario Let’s say you’re approached to invest in an enterprise SaaS startup. Founder has a great background. MRR is $200k, growing 20% MoM.   LTV:CAC is 5:1.  Quick Ratio greater than 4. Catch is, you can only ask 3 questions for 3 specific data points, in order to make your decision.  What three questions do you ask?

On this special segment of The Full Ratchet, the following Investors are featured: Ty Findley Stephen McIntyre Beezer Clarkson Sarah Tavel Each investor highlights a situation where they decided not to invest, why they passed, and how it played out.

On this special segment of The Full Ratchet, the following Investors are featured: Tom Tunguz Grace Isford Ben Casnocha Courtney Reum Each investor discusses a portfolio company that did not survive and why it was that they failed.

George Arison of Shift joins Nick to discuss Going Public via SPACs and PIPEs, The First Mover in Ridesharing That Lost to Uber, and Building the Online Marketplace for Used Cars, Shift. In this episode, we cover: Walk us through your background and path to tech. What was the outcome of taxi magic? Shut down? When you spoke with Bill Gurley - rumor has it he pushed back on the model.  Did you consider switching? What is Shift? How are you different than Carvana? How accurately can you price a car sight unseen? It feels like you are effectively CarMax online...  If CarMax is such a good value prop for seekers and buyers, why do you think they only have a 1% market share? There were lots of ways you could have expanded early on... your offerings... geography... and even product/business lines (like financing)... talk us through the early decisions that were made and how they were made The name is great but does Gen Z get it?  No one shifts anymore Online marketplace solving an extremely frustrating and time-consuming consumer life event but it's a very Infrequent transaction so you need to be top of mind when someone is buying a new car or ready to make a transaction... How are you thinking about that? Talk about your decision to go with a SPAC to go public. The decision to go direct-listing would be in cases where the company is more of a household name? SPACs were a four-letter word in the '90s... apparently, there were some bad situations... what is the risk here, and how has that been addressed by the modern SPAC structure? Do sponsors get 2% or 20% off the top? What was the value of the SPAC vs. the valuation of your company... were you (and other shareholders) diluted by the SPAC investment amount And the rest/the balance of capital comes from a PIPE, correct? As an investor, wouldn't the preference be to invest in the SPAC vs. the PIPE? Building a company in SV or not, and where that is headed? What advice would you have for founders before selecting VC partners? What was the experience as an openly gay man building a tech company -- do you think that presented a more difficult path to success?

On this special segment of The Full Ratchet, the following Investors are featured: Check Warner Ramy Adeeb Patrick Gallagher Shawn Carolan Each investor describes the most unusual situation or pitch that they've encountered as an investor.

Eric Collins of Impact X Capital joins Nick to discuss The Changing "Search Image" of Founders, Lack of Diversity = Missed Opportunity, and COVID Effects on the BLM Movement in Europe. In this episode, we cover: Walk us through your background and path to VC What's the thesis at Impact X? As a black CEO and fund manager, in what ways do you think your experience fundraising was different than your white, male peers at other firms? How do you approach sourcing? What's unique about the way you've built your network vs. other firms? Less than 1% of venture funding goes to black-led and we've heard the tired line that "not enough companies are founded by underrepresented founders and black founders"...  Are you concerned that you'll have fewer deals or less pipeline? What's the right number of deals per year where you feel like you're seeing a sufficient amount? I've heard about the "deep analysis" you do and how that creates the edge.  Can you describe what this entails? Do the issues run deeper in the LP community than even the GP community? Are the return expectations different for your LPs vs. a non-Impact fund? A lot of the impact you are creating is long-term in nature.  What are the leading indicators of success for your fund? How do you set objectives and measures to know if you're winning/exceeding the plan? In response to the pandemic, the gov't created a number of programs to help fast-growth companies.  What was the impact on your underrepresented pipeline and portfolio? Black Lives Matter has been the center of attention here in the states.  What's the status of the movement in the UK and how has it impacted your efforts at Impact X?

On this special segment of The Full Ratchet, the following Investors are featured: Richard Kerby Jaclyn Hester Lanham Napier Steve Blank Each investor illustrates a critical lesson learned about startup investing and how it's changed their approach.

Erik Torenberg of Village Global joins Nick to discuss Decentralization of VC, Why Your Fund Size is Your Strategy, and Why Startup Formation is the Most Important Contributor to Economic Growth. In this episode, we cover: Walk us through your background and path to VC What were the biggest lessons learned from Product Hunt that you took to investing? Recently had Ben Casnocha on... anything specific you'd like to add about the thesis behind Village Global? How do you think about working with experienced vs non-experienced angels? How do you think about portfolio construction for VG? Fast forward... some angels have strong early signals of success, others don't -- do you cull the herd or amplify those that are good pickers? Considering this, why do you think so many VCs have concentrated portfolios? How do you think about follow on investing? What is the role of a pre-seed firm? If there's a weakness in the Village model... what is it? Part of your model is to increase the amount of founders and investors.  What do you say to those that argue there's too much capital already? What’s does the future look like for Venture? What’s your advice for people getting into venture? Three data points Let’s say you’re approached to invest in an early seed stage SaaS startup... The founder is a technical serial entrepreneur with two solid 8-figure exits.  And she has a credible co-founder that is more business/commercially focused; An MVP of the product has been launched and was the top product of the day on Product Hunt, when it launched; and The Product launched two months ago and currently has $5k of MRR. The catch is, you can only ask 3 questions for 3 specific data points, in order to make your decision.  What three questions do you ask?

On this special segment of The Full Ratchet, the following Investors are featured: Jonathan Hsu John Vrionis Trae Vassallo Kane Hsieh Each investor discusses sectors, drivers, and/or trends that may have a significant impact in the future and are potentially positioned for outsized-returns.