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

Taranvir Johal & Salman Elmi of Tavolo and Top Figure join Nick to discuss Racism in Venture -- A White, Male VC Threatens Black & Brown Founders. In this episode, we cover: Quick personal backstory and origin story for Tavolo -- Taranvir. Quick personal backstory and origin story for Top Figure -- Salman. So, there was an incident last week in Minneapolis where venture capitalist, Tom Austin (who has since been fired by F2 Group), confronted you in your building's exercise room.  You guys captured a video of the incident and it begins with w/ Mr. Austin pointing his mobile phone camera back and forth at the three members of your team -- as he confronted you. Walk us through what happened before and after the video recording. Very, very reminiscent of the Amy Cooper video from NYC's Central Park -- shocking similarities between your situation and the Cooper situation.  It's nothing short of tragic.  What were you feeling as this was happening to you? What has it been like growing up in a society that is not structured to promote your success? Tell us about your experience as black and brown founders in the startup world? How does what happened change the way you go about business in the future? Thoughts on the murder of George Floyd and impact on the black community? What are some of the changes you’d like to see most from a systemic point of view? What do you think are some actionable steps investors and founders can take to respond to what’s been going on? To listen more, please visit http://fullratchet.net/podcast-episodes/ for all of our other episodes. Also, follow us on twitter @TheFullRatchet for updates and more information.

Jim Douglass of Fulcrum Equity Partners joins Nick on a special Crisis Coverage installment to discuss Pandemic Effects on B2B SaaS and Healthcare -- Total $ Invested, Multiples, and the Exit Environment. In this episode, we cover: Background/path to venture. The thesis at Fulcrum. Investments since COVID -- Anything additional you need to see or changes to process to get to investment? B2B SaaS -- impacts to existing contracts and funnel opportunities thus far? Recently, we had Byron Deeter at Bessemer on the show talking about why this is the seminal moment for Cloud and b2b SaaS companies, do you share that excitement with Byron or where do you stand? Previous downturns have had a deeper and longer term effect on growth stage (volume and dollars) then the earliest stages -  what are your predictions for the near term and mid term on growth stage investing? How do you and your partners think that investment multiples will be affected? What about the exit environment...What have you been seeing in the current exit environment and how do you think it will be impacted over the next 12 months or so? I believe the entire team at Fulcrum has experience as an operator -- How does this impact the way you work w/ portfolio companies? Substantive changes to operating plans? Healthcare Services framework and approach to investing? What actions are you seeing CEOs take and/or what are you encouraging they take in order to maintain operating culture in this distributed work environment? "3 data points" Independent of the COVID situation, let’s say that you are approached by a B2B SaaS company that is currently doing $5M ARR, has a 5:1 LTV/CAC Ratio and MoM growth is trending at 10% Catch is you can only ask for 3 data points to make your decision. What 3 questions and data points do you ask for (can not ask for P&L, Operating Plan, Cohorts, etc... need to be specific data points)? To listen more, please visit http://fullratchet.net/podcast-episodes/ for all of our other episodes. Also, follow us on twitter @TheFullRatchet for updates and more information.

On this special segment of The Full Ratchet, the following Investors are featured: John Vrionis Elizabeth Yin Bobby Franklin Jeremy Neilson Each investor illustrates a critical lesson learned about startup investing and how it's changed their approach. To listen more, please visit http://fullratchet.net/podcast-episodes/ for all of our other episodes. Also, follow us on twitter @TheFullRatchet for updates and more information.

Melody Koh of Nextview Ventures joins Nick on a special Crisis Coverage installment to discuss Super-Technologies; The Everyday Economy; The Overlooked Working Class; and Fear of Missing Out vs. Fear of Looking Dumb. In this episode, we cover: Background and path to venture Thesis and Focus at NextView Hands-on approach (only 2-3 investments/yr)? You wrote that when it comes to investing in the COVID era -- FOMO (Fear Of Missing Out) is replaced by FOLD (Fear Of Looking Dumb). What are you seeing from other investors? How will this effect 'Seed' as a Stage of investing? How has the crisis effected your approach? Conviction without face to face? Recently heard about NextView’s new virtual Accelerator... congrats on the launch. Can you give us a quick overview of the program? Do you have any predictions on the long-term effects of this crisis on the ‘Everyday Economy’? I saw your tweet about companies shifting the real estate burden to employees as everyone works from home... do you think companies should subsidize this? Super-Technologies...  railroads, electricity, automobiles, and now internet connectivity.  Ideas about what may be some of the next infrastructure type super-technology? Why do you think the working class has been overlooked as an opportunity for innovation? You cite labor as an opportunity ready for innovation. Why is now the time for innovation here? You point out a really interesting observation -- that this demographic is more likely to use smartphones as their daily driver and that they tend to skew towards older devices. What does that mean for new tech products? Are there examples of tech companies that have successfully built a company designed for this category of workers? What are the key success factors or key criteria for success, when launching technologies for the working class? Which working class industries do you think are in the best position for change? To listen more, please visit http://fullratchet.net/podcast-episodes/ for all of our other episodes. Also, follow us on twitter @TheFullRatchet for updates and more information.

Jeff Fluhr of Craft Ventures joins Nick on a special Crisis Coverage installment to discuss Launching StubHub During the Dotcom Crash; Why Market Need Trumps Market Timing; Choosing B2B vs. B2C; and Why Founders Shouldn't Let VCs Decide Their Fate In this episode, we cover: Background and path to venture Thesis and focus at Craft So, you incorporated Stubhub in March 2000... just weeks before the dotcom bubble burst. Was there any hesitation or second thoughts as the tech world was collapsing around you? LESSON 1: IT’S ABOUT THE MARKET NEED, NOT THE MARKET TIMING You talk about the difference between market need and market timing. Can you explain what you mean by this point? How did you validate the market need, beyond just the experience of you and others you knew? LESSON 2: BE FLEXIBLE IN YOUR STRATEGY Often founders face this question of choosing B2B vs. B2C... can you talk us through the early days and StubHub and the how the strategy evolved? Do you think if you initially focused on the B2C segment when the crash just happened, results would’ve been different? What metrics were you optimizing for in the early days. While there were some successful marketplaces, like eBay, the playbook and range of metrics, I'm sure, were much less known and developed in the early 2000s vs. the resources we have to leverage today. LESSON 3: VCs DON’T DECIDE YOUR FATE Tell us about the Series A Raise -- did it go smoothly? When did you shift the model and begin engaging more B2B channels? Was that post-Series A, B?  What guidance do you have for founders re. focusing on one and when to expand? What was it, do you think, that kept all the VCs from investing? LESSON 4 : DEPRESSION-ERA VALUES CAN BUILD A STRONG CULTURE What were the three values that were core to your DNA and culture -- that helped you survive and ultimately thrive? Has this shaped the way you evaluate companies, pre COVID and during? LESSON 5 : MANY THINGS ACTUALLY GET EASIER In what ways is it easier to build during a recession? If you were building another company right now, what’s one major thing you'd do differently? To listen more, please visit http://fullratchet.net/podcast-episodes/ for all of our other episodes. Also, follow us on twitter @TheFullRatchet for updates and more information.

On this special segment of The Full Ratchet, the following investors are featured: Ryan Gembala Jenny Rooke Jeff Clavier Courtney Reum Each investor discusses sectors, drivers and/or trends that may have significant impact in the future and are potentially positioned for outsized-returns. To listen more, please visit http://fullratchet.net/podcast-episodes/ for all of our other episodes. Also, follow us on twitter @TheFullRatchet for updates and more information.

Sarah Tavel of Benchmark joins Nick on a special Crisis Coverage installment to discuss Consumer Marketplace Investing; Why Aggregate GMV is a Red Herring; and Minimum Viable Happiness as the Key to Market Leadership. In this episode, we cover: Background and path to venture? Quick overview of the thesis and your focus at Benchmark What are your thoughts on platform VC? What tactics or approaches do you use in the process of “scaling your founder”? You sit on the board of some companies, such as HipCamp, that have been greatly affected by the pandemic -- What are some of the creative responses you've seen from portfolio companies? Is there anything fundamental to Marketplace businesses that you think will shift as a result of the crisis and changes in consumer behavior? In the food delivery space, we recently witnessed DoorDash unseating the larger incumbent: GrubHub, with the greatest market share. DoorDash started after PostMates and years after Grubhub... how'd they do it? Do you currently see or do you predict more situations where a startup capturing more supply will lead to displacement of a large tech company as mkt share leader?... if so, in what markets? Recently, you published a series of newsletters talking about the hierarchy of marketplaces... first off, what are the three phases that you've outlined here? Why is a push to aggregate GMV across many markets, less important than dominance in one market? What is Minimum Viable Liquidity? How do you define/measure happiness? At what levels do you know you've reached MVL or MVH? Level 2 of your Marketplace framework... Can you talk about what it means for a marketplace to “tip” and how do marketplace based businesses achieve this? Is there something specific that happens w/ the metrics of a businesses that show that the marketplace is tipping? Do different stages of fundraising map to these phases? The third phase you refer to is the 'Outrun' phase... walk us through the main focus areas in this phase. Homogeneity of the buy-side as a negative... can you expand on this? How does your evaluation of a marketplace based business differ whether it’s a b2b company or a b2c company, if at all? Let's say you are approached to invest in a Consumer Marketplace company with $10M in GMV, a 25% take rate, and 20% MoM growth for the last 6 months. Catch is you can only ask for 3 data points to make your decision. What 3 questions do you ask for? To listen more, please visit http://fullratchet.net/podcast-episodes/ for all of our other episodes. Also, follow us on twitter @TheFullRatchet for updates and more information.

Beezer Clarkson of Sapphire Ventures joins Nick on a special Crisis Coverage installment to discuss Platform LP; Allocations in a Down-Market; COVID Strategy Drift; and Emerging Manager Selection. In this episode, we cover: Background and path to Sapphire? Overview of the thesis at Sapphire? You have relationships with many different funds and fund managers, how have you been managing the current situation from the LP side? Down years tend to be very good times to invest, what portion of institutional LPs do you think will view the current situation as an opportunity to deploy versus those that tighten up? Strategy drift of a venture firm can be concerning. COVID has impacted some strategies more adversely than others -- what have you seen as far as shifts in theses and deployment strategies among firms and what's your opinion on GPs changing course due to COVID/SIP? Changing gears a little bit, but I want to talk about OpenLP. What is OpenLP and why'd you launch it? There was a good article recently published by Kauffman Fellows talking about the relationship between LPs and micro-vcs and emerging fund managers. It mentions that most institutional LPs won’t invest in emerging managers until they see them produce cash-on-cash returns, but at that point, they’re no longer an emerging manager. What do you need to see from emerging fund managers to consider investing in their subsequent funds? As far as skills are concerned, which skills do you often see emerging fund managers have aside from having access to great deals, making good investment decisions and providing value to founders? Have there been any novel ways that you've seen smaller firms differentiate themselves that you can mention? Any other areas where you'd like to see more focus? Let's say you're looking at an emerging fund manager's existing LP-base -- what, if any, are the red flags or things that might give you pause? I know you place significant emphasis on the human aspect of working with people, how do you assess whether or not a fund manager has the people skills that you require when deciding whether or not to invest into their venture fund? How can a fund manager determine whether an LP has real interest vs. just being a tire kicker? You are approached to invest in a Emerging VC Firm. Their last fund is currently at 35% IRR 1.3 TVPI and is 2018 vintage. Catch is you can only ask 3 questions (for 3 additional data points) to make your decision. What 3 question do you ask? Granted this is not how investing works! ; ) Any advice for fund managers that are early in the career, planning a fundraise within the next 12 months? To listen more, please visit http://fullratchet.net/podcast-episodes/ for all of our other episodes. Also, follow us on twitter @TheFullRatchet for updates and more information.

On this special segment of The Full Ratchet, the following Investors are featured: Alex Osterwalder Scott Kupor Cheryl Cheng Each investor highlights a situation where they decided not to invest, why they passed, and how it played out. To listen more, please visit http://fullratchet.net/podcast-episodes/ for all of our other episodes. Also, follow us on twitter @TheFullRatchet for updates and more information.

Byron Deeter of Bessemer joins Nick on a special Crisis Coverage installment to discuss Why This is the Seminal Moment for Cloud and Lessons from 19 Unicorn Investments. In this episode, we cover: Background and path to venture Stage and focus area at Bessemer? You’ve said that many of the lessons learned from the 08 crisis are applicable today -- what are the top 2 or 3 lessons that founders can directly apply to their business during the current crisis? From a startup standpoint, how is this crisis different from the last? What are your thoughts on the dynamics of the PPP and the role the government is playing amid the crisis? We’ve seen significant volatility in the public markets, but Cloud has remained pretty resilient... what have been your macros observations on SaaS and Cloud businesses over the past couple of months? Why is now “the iPhone moment” for Cloud?  We’ve seen a number of business models gain increasing momentum, such as freemium, low friction and developer centric to name a few -- what have you observed w/respect to evolving business models and which do you think will become more pervasive in the coming years? You’ve talked in the past about the importance of channel scalability for SaaS and cloud companies, define channel scalability for us and what some red flags that may reveal a lack of this? A lot of analysis that goes into these businesses and every situation is different, so I don't want to over simplify... but have you found some general characteristics that separate the winners from the losers? Trust is such an important part of a relationship between founders and investors, what's your approach to building relationships, and do you have a specific example/story? We saw substantial growth in the number of unicorns from the 2000’s to the 2010’s, what do you expect to see this decade? How do you feel about the trend of companies to stay private longer? From the 10 Laws of Cloud Computing... which are the ones most often absent from opportunities you're reviewing? Law 1: In the cloud economy, scale wins Law 2: Growth at optimal cost Law 3: Invest behind the cloud sales and marketing learning curve Law 4: Product as a competitive advantage Law 5: Master the 5 C’s of cloud finance Law 6: Discover your secret KPIs Law 7: Customer success is company success Law 8: Impact through engagement or insights Law 9: Tone starts at the top Law 10: Map your fuel stops In the last State of the Cloud report, you mentioned 5 predictions about the future of Cloud, can you highlight a few you're most excited about?  To listen more, please visit http://fullratchet.net/podcast-episodes/ for all of our other episodes. Also, follow us on twitter @TheFullRatchet for updates and more information.