David Tisch of Box Group joins Nate to discuss Why Optimizing for Ownership is a Trap, The Future of Seed Investing, and The Opportunity in Consumer Social. In this episode we cover:
- How to Avoid the Short Term headfakes
- Boxgroup’s Portfolio Construction
- Where David thinks Seed Pricing will go in ’23
- And More!
Guest Links:
The host of The Full Ratchet is Nick Moran, General Partner of New Stack Ventures, a venture capital firm committed to investing in founders outside of the Bay Area.
To learn more about New Stack Ventures by visiting our Website and LinkedIn and be sure to follow us on Twitter.
Want to keep up to date with The Full Ratchet? Subscribe to our podcast and follow us on LinkedIn and Twitter.
Are you a founder looking for your next investor? Visit our free tool VC-Rank and we’ll send a list of potential investors right to your inbox!
0:18
David Tisch joins us today from New York City. David is co-founder Managing Partner at Box Group, an early-stage venture fund with an enviable track record. His investments include Ramp, Airtable, Plaid, Ro to name a few. Prior to founding Boxgroup, David was the founder of Techstars NYC. David, we’ve really been looking forward to doing this one. welcome to the show!
0:40
Thank you for having me. Excited to be here. I wonder what we’re gonna Yeah. So
0:45
I’ve been looking forward to this one I really have. For those that don’t know, can you give us your one to two minute background and share the story as to how you came to found box group?
0:53
Absolutely. My name is David Tisch and the managing partner at Box group are a small seed stage focus fund, six of us based out of New York and one out of San Francisco been seed investing in technology companies for about 13 years now. We’re investors in over about 400 companies throughout that period. And, you know, the focus of Bach’s group is to be a collaborative seed fund, we like to find interesting founders with big visions and get involved the day they’re starting the company or well, before that, we’re happy to meet people when they have an idea before they have an idea, as they’re thinking about starting something and you write precede seed, early stage checks, and try to help them achieve their dreams.
1:37
Awesome. And if I read correctly, you also started TechStars, New York, New York. Is that correct?
1:43
Yes, I helped launch the TechStars program in New York and ran that for a couple years. All the way back in 2010. dates me?
1:52
Yeah. So I’m guessing you got to spend a little bit of time with Brad Feld? Absolutely. What What would you say? Brad? You know, he’s been on the show a couple months ago. awesome guy. I mean, he’s one of the OG seed investors. What did you learn from Brad, that is carried with you throughout your career today?
2:09
A ton. I mean, what a privilege it was to spend, you know, parts of my early career getting to pick Brad’s brain. And, you know, as you said, he’s an OG Brad has been investing in software and passionate about this world since well, before it was trendy and people devoted purposefully, their academic and then post school careers to it. I think, for me, one of the, one of the lines that Brad I think, told me early on in my careers, it’s pretty simple. And Brad tends to have a way with words where he breaks things down into like an actionable point, he said, investors invest. And if you want to be an investor, and if you want people to know who you are, in this world, make investments. And I think what that speaks to is the idea of, it’s free to take a meeting, it’s free to waste entrepreneurs time and to, you know, take up their scheduling to run processes that are never ending and mislead them with the decision making process. But I think what Brad really was speaking to is, you know, the only way to learn more about investing is to actually do it. And I’ve taken that to heart, it was something early on that was important to just be direct with founders and sort of say No, when you’re ready to say no, and say yes, when you’re excited enough to say yes,
3:33
yeah. When you can only lose your money once too, right? It’s a,
3:36
you know, this, this business is a very binary decision for an investor. You either say yes or no, there’s no maybe it’s a yes or no. And then the outcome is very decoupled from the decision from a timeline perspective. So I think boiling down the business a yes, no decision is incredibly simple in some way. But it’s actually the truth of the job that we do as a venture capitalist. It’s you, you find a company, you’re excited about a group of people you’re excited about. And then you say yes, no, and then everything post. Yes. You actually are never able to change the snow and everything post know if you screwed it up. It’s very hard to change as well.
4:19
Yeah. Well, I’d love to get your opinion on something because as I hear you talking about this, at least personally, and I’m so early in my venture career, but some decisions don’t feel as binary. And I’m curious for you of every investment is truly like you are badly convicted and what they’re building or if they’re, there is an element where you have your reservation that feels like a tweener. I’m curious, how how did you deal with the investments at the moment that it felt like a tweener? Like, have you learned to just solely be like if I’m not 100% convicted in this team and this market, I’m just out or has your approach as state how you get to yes change over your past decade of being an investor? Because there’s always risk, it’s hard to get comfortable with elements of it.
5:09
It’s a fair question. And I’m not I’m not sure I have a great answer. I think the job in many ways, is so long term in terms of you make a decision and a company works or doesn’t work over an incredibly long amount of time they trying to make trying to figure out how to be better. And making decisions is really hard. I think companies that don’t work out, the feedback loop tends to be quicker. So you can try to extract the lessons from those, but that actually isn’t the signal that’s more important. It’s the ones that work and figuring out how to repeat saying yes to great companies. That’s, to me the more important skill to try to hone in on. But again, the timeline just makes it hard. So I don’t know that we’ve gotten exponentially or even, you know, step function better. That decision making process of saying, yes, no, I think some days, you know it, to me, the most important thing is trying to control the variables that you can control. And so are you showing up to meetings, open minded in a positive optimistic mood, our job is to meet people have dreams and get behind them and help them achieve those dreams as a vaster, you’re removed from the building of that opportunity. And so it really is this, join a founder on their journey, that we look at things and then help them support them, you know, be there when they want you to be there, and get out of their way when they don’t. And in a given first meeting, second meeting, when you’re making that initial decision, it’s really about getting to know somebody and how they want to go and build their company, and getting excited enough to say yes, and we try to take every meeting with a goal of saying yes, we try to lean in optimistically, to hearing why somebody is building something. And getting to yes, I think it’s important for us to control our entry point into a meeting. And so that’s a variable that we control, if we’re having a bad day, and then take a meeting and you bring that bad day to a meeting, you’re suddenly in the wrong mindset to process what’s in front of you or to, to dream alongside of that founder, that’s talking passionately to you. And so I think it’s important to do that. And then, you know, not changing your bar sort of operating in a place of consistency is another factor. So to us, you know, if you think about the poker analogy of playing on tilt, you don’t want to play on tilt, and you don’t want to over rotate around fake signals. And so what does that mean? I think early on in my career, if we had a company that we had invested in that looked good, we would say, Okay, what’s good about that founder? What’s good about that market? What’s good about that business? How do we look for that? Again, what you don’t know is how good is that good? Is that good short term temporary, or is that good? A forever. And so if you over rotate on, in essence, short term fake signals, it’s very hard, you were sort of, you know, doubling down on the wrong factors. And so it’s a to me, it’s a very gut driven business, the taste of the types of founders it you like, and I like might be different. And that’s okay. And it really is about trying to listen to your gut and hone in on the things that you’re looking for, I think you talked about conviction, I think the version of conviction everybody needs is different. So at the precede at the seed, finding true conviction, you’re going to need to find that off of very little data very little signal a lot of times and so you have to be comfortable operating in a lot of unknowns. And so, you know, as we like to say, it’s like squint and see something special, and squint to see something special with the product with the team, with the market with the idea. And then can you squint and see something special, because that’s, in reality, what you’re investing for is the future. And you want a founder to walk you on that journey to help you squint and see something special. And if they don’t, then it’s even harder to see it because, you know, they’re sort of not helping you get there and so yeah, that’s my
9:49
make you get there then how are they going to get customers there? How are they going to get there, you know, early talent there and downstream investors too, right?
9:56
Or they’re just having a bad day. And or that like you are there not check it. And that’s hard because it’s, it’s, it’s our job to like, try to get it right. And I think they’re doing the founder, the founders job is so much harder than an investor’s job. And what a founder has to go out and do every day is the hard job, we are again, making a binary decision to give them money to help them and then ideally, support or not. And so, you know, sometimes you just get a founder, who isn’t there might be on their ninth pitch in the day, and you’re at the end of the day, and they’re tired, and that’s understandable. And so it’s my job to squint and see past that sometimes.
10:39
Yeah, yeah. I, you mentioned something that I do want to circle back to you talked about over rotating on the wrong signals, and everyone’s lines is different. You mentioned that, but what in your opinion, from your point of view, what are some of the signals that early stage investors that call it precedes, see that they’re over? Rotating on?
10:58
I don’t know, everything. I was like a huge caveat, because it’s all nuanced. But I think early, early engagement over the short term is something easy to like early data, if the end isn’t big enough, or if he isn’t the right end, you might be over rotating on, you know, something that was that was hocked or pieced together that isn’t scalable. And it’s not that you’re looking and assuming you can find something scalable early, but it’s how does the founder how does the team explain and walk you through early data. And if they’re over reliant on the numbers speak for themselves? I think that’s very few companies, where the numbers do truly speak for themselves. And so that’s one, you know, the the competitive landscape when a founder is over focused on the startup landscape and under focused on the big company, and big company doesn’t mean the biggest companies. But there are typically companies where a startup could be a feature on their roadmap, or a standalone company and being able to articulate that, and the competitive landscape. And just an appreciation for the complexities of the market, I think is very important. I think you, you correctly over rotate on quality hiring early on. I think that’s one of the strongest signs to me, of a compelling team is when you’re able to start attracting unique outlier talent past the founding team. And even amongst the co founders. Right, what’s the composition of the CO founding team is I think something that’s properly, you know, right over rotate.
12:39
Yeah, I couldn’t tend to follow up questions to what we’re just talking earlier. But I do want, I do want to get into portfolio construction, because that’s less interest is a hot button, it is less interesting. But it is sort of a hot button topic as of late where we’ve seen all of a sudden, we have all these funds that raised in 2020 2021, now they’re going back to market. And they realize LPs are looking for certain principles. And you guys have sort of bought some of those principles, because you have a lot of early stage firms that are optimizing for ownership, they’re more concentrated. And I know you guys have a very different approach and philosophy. And I’d love if you can talk about what that is. And I’m excited to get into some of the details around it.
13:24
Yeah, I, you know, our, our passion is to work with founders at the earliest stages, our passion is not to take our business model and put it in front of the founders. And I think it’s important for us to walk into work and do the core of the job, which is find people that we’re excited to work with, and work with them. And I think our math needs to work itself out. And so if our portfolio construction doesn’t lead us to outcomes that our investors are satisfied, or hopefully really delighted with, then they’re not going to keep investing in our firm. And we’re gonna have to do something else with our lives. And so it’s not me avoiding this question. I think we are in venture a lot of the times focused on judging performance in venture. In a very short term perspective, our job is to return the fund, and a lot of multiples on top of that, that can take 10 to 15 years. So I think when you’re talking about venture math, the realized venture funds are the only ones that actually make sense to dive into details with the unrealized venture funds are made up math in some way. And they’re made up math that you can as a manager, justify because you can see the math starting to play out as an LP you can get excited about and invest in because you’re starting to see the math play off but until the fund is fully realized, I think diving into debt Was this work at X or Y or Z scale? I don’t know. It’s a fake exercise. So, you know, Union Square Ventures, so we have a ton of admiration for their first venture fund, I think just finished, like this year. I think Fred Wilson wrote a blog post about that. That’s, I don’t know, it was like 1820 years later, I would go. And so that fund, maybe maybe a couple years ago, when it’s almost at the end, you can start to unpack the details of it. But I think, to try to focus today on markups, and using markups as a way to justify fund mouth. It’s a fake exercise, and I don’t think it does anybody a service to do that fake exercise. So back to what our model is our model is to find great people, and give them money and take equity, and support them on their journey. And if we find enough great people who are building great companies in a given fund, or fund will do quite well,
15:57
the thing that I wonder those, so you mentioned, you’ve done 400 Plus investments now, and you’ve done ramp, plaid, airtable. I mean, like some of the biggest companies that every investor would be envious, to be in. I’m curious for you, this is kind of a two part question. But the first part is when you heard those pitches, did it sound different? Like did it sound better than your average investment that you make at bots group?
16:23
It’s a funny question, and I appreciate it. And I’m gonna answer it. I think if any investor was able to perfectly qualify, each investment that they’re presented with, you would have a very different success percentage in this business. I don’t think there’s any firm at the early stage, that is able to dramatically skew their success percentage versus fund growth, great companies, and fun companies that don’t work out. And so like, if we get pitched a company, we’re like, oh, this is the best company we’ve ever been pitched. We should, or rotate to use our previous language, and give them all of our money. And we should spend the whole fund on it. If we’re right. I think it’s a myth to think you are that good. And it’s this like, retro spective fake confidence to tell yourself I knew it when I saw it. That said, each of those three stories you brought up or, you know, special people building today, obviously special accompanies ideally, every investment we make, we can externally articulate why we got excited enough to make an investment. Plaid was an investment we made in 2012. So it’s 11 years ago, Eric table I think, was 2012 as well, 11 years ago, and ramp was 2018. So five years ago, might have been 19. These journeys take time, each of them are very different. And the people behind them and how they approach building their businesses are different. Zach and Platt, and William at plaid, started with a slightly different vision. And upon starting to build that vision uncovered, what was a potentially bigger opportunity in what today is flat. And so pivot or iteration, you know, plaid was that and I think it was knowing Zack and getting to see Zach and William work that got us excited enough to make the investment how we at airtable had a clear vision, it is almost to a tee, the product that you see at our table today. It was how do you merge a spreadsheet and a database in a much more robust way to allow people to do things to the you know, back then were happening across two different pieces of software that were unrelated. And they were so product focused on getting the product right before putting it out into the world. But I think if you look at it, why are tables succeeded? It’s because of that product focus. They needed to get it right. Otherwise people wouldn’t, you know, capture what they were building. I think gram is a very fast moving high growth company where Eric and Kareem had a clear vision that they saw a market opportunity. And they’ve attacked it with aggressiveness and excellence and, you know, built a unique team to iterate on product quickly and build a robust suite of tools beyond just a corporate credit card that enable ramp to really capture a large chunk of the Office of the CFO. And that CFO suite can be pretty extensive in terms of the amount of product opportunity that you’re able to capture. And so people it’s the it’s each of them, individually and collectively with their team executing on a sequenced vision, you know, market that each market evolve differently and the market opportunity that airtable was doing is different than the market opportunity that ramp is competing in. And I think that is you know, it’s so easy to retrospectively go back and say Hey, here’s what we saw that that specific day. We knew it when we saw it, but it
20:05
Yeah, investors love to talk about the wint invalidate their thesis after the fact, right? It’s like when you look at the Midas list, there’s always the one or two investments that everyone has made, they don’t show the long tails for the others, which is you can
20:21
hear behind each of these investments is a founding team that is spending their life on that company A, you know, whether it’s two years because it doesn’t work, whether it’s six years, and it works or doesn’t work, or whether it’s 1520 years, and it’s their life’s work. The people behind the team are more interesting than, you know, the the venture summary of how a VC was so amazing at identifying a company.
20:44
Yeah, the reason why I asked you that question is because we talked about the tweener companies earlier, where you might be, you know, trying to either tuck away in or out of the deal. And then you come across a highly ad narrow table, and he paints the vision of, you know, the merging of the database, with forms and an easier interface and a no code, low code fashion. And it just makes sense things click, and it’s easier to get to yes. And those instances, and when you have that sort of access and success that you’ve had a box group, I’m curious, what why why not put more into it, like you said, if you would have known you would have backed all your money into it? And maybe, you know, maybe you you really don’t know, maybe isn’t orders of magnitude more special than the pitches that you hear for your other investments.
21:37
I always ask that to every single firm and whether they invest with, you know, concentrated, scaled ownership, if they know what the winners are, why aren’t they over? You know, deploying into those winners at every single stage perfectly? A sometimes a founder won’t take more money, right? There’s a dynamics around but be, I think it’s funny to assume that people are so confident in all knowing of the future, you know, when when the behaviors don’t lead you to that conclusion?
22:17
Do you think boxwood will get to the point that you’ll lead? I know, you’re all about consistency, repeatability, for your LPs, I’m sure a number of these deals you could lead Why not lead?
22:28
Our job is to support founders and founders want us to lead us precede round, we’re happy to do that. I think we are. You know, again, our business model is not that interesting to me to talk to founders about our job is to get excited about a company and work with a founder to be part of their journey. And whatever the dynamic of that machine is, I think, is something we’re, you know, open to, I think, you know, the word lead, in the early stages can mean a lot of different things. And, you know, we’re happy to be the first check in, we’re happy to do a check on our own, we’re happy to give a founder, a friend and few friends and family round, you know, as their ideating, as they’re thinking about starting a company, we’re happy to be very creative in the ways that we support founders, without obsessing over ownership and taking our business model and shoving it in their face and saying, we need this or this is the only way this works. Our job is to be creative with founders and be part of their journey and in whatever way works for both of us.
23:34
Would you lead a seed deal? Or is it only leading precede?
23:38
I don’t I mean, our our intention is not to be competitive with other funds to say pick us or them. So I think in situations where it’s a founder led decision, we’d be open minded to a variety of things, if it makes sense for us to be part of a group of other investors, and we fit as the lead in that situation. Great. But we try not to put founders in a position to say pick us or them as much as it is like, we want to be part of this. So pickups.
24:10
Yeah. Yeah. I, I’m curious if you found a box group today, rather than 10 years ago, or it’s over 10 years ago. Now. What what would be different? If you were to start the firm today? Do you think it’d be the exact same approach?
24:23
I would have said, Yes. All the companies that we looked at and said no to that have become great. That would be my main correction.
24:31
Got it? Are there are there any nodes that are like particularly sting you and hindsight?
24:38
You know, we we’ve had an opportunity to invest in some companies that look really impressive today that we should have said yes to and I think founders don’t like when you name names here, I think it you know, some founders do and some founders don’t. And so I want to be respectful, without knowing if people get like, annoyed about that. I think I said that once in my career and so We got annoyed and I was like I there was like a flattering comment. Not a bad one. But you know, I, our job is to think about tomorrow more than the past. But I think certain investors have FOMO. And, you know, regrets and sort of get haunted by those things. I am one of those people. So I, I live with the mistakes and other investors are able to just move on. And I think it’s teaches on
25:23
when you do the post mortem on the nose. So names aside, have you been able to tease out or make any adjustments always meet
25:31
this always? Okay, always meet the CEO, I think sometimes founders will have the non CEO, take first meetings. And it’s important to see the person who’s running the company and their vision and how they articulate it. And in conjunction with that, like meet the founding team, too. So it’s not just meet the CEO, but it’s meet the founding team, because you can see the dynamic of a team. So I think it’s important when we look at, you know, certain mistakes, and then valuation, at certain points, like what you thought was expensive, no longer is expensive a couple years later, and then what is expensive is very expensive a couple years later, and so the valuation question just tends to be the wrong one in a snapshot versus across the portfolio. So passing on something, because it sounds expensive, that you’re excited enough about is typically not the right decision. And it hasn’t been for us in the past. And then, you know, the ones that are harder to fix, or like, we just misunderstood the market, we didn’t, we didn’t appreciate that this was a standalone, scalable opportunity. And I think it’s on us to get better at that. And those are mistakes that like, you know, we should just learn from and try to again, see, like, we squinted and saw the wrong thing. And you should have squinted and seen the bigger opportunity.
26:50
I feel like market size is a common, you know, a common myths for investors, I guess, how do you? How do you not index too much on market size? And how do you not fall into the trap of this market is too small to produce adventure, adventure like return versus, you know, there’s still companies, I’m sure that you see where you fully believe that the market is too small, like, how do you walk that line?
27:14
It’s really hard. I think software is the key factor for us if it’s a software driven business. And you know, if you can figure out that the initial wedge, either as a standalone thing is big enough, or that the initial wedge opens up just a lot more opportunity. I don’t know how to do that in real time perfectly. I wish I did. I think we try very hard to be optimists around market and not pessimist. And so, you know, when you when you hear you want a founder to walk you on their big vision journey, and not be overly pessimistic about dismissing it, because sometimes it is that big dream that is needed to make the market big enough. But it’s hard. I think this business is very hard, in real time to get right. And I think we strive very much a box group to learn and have founders help teach us why what they’re working on is big enough. I think when a founders ambition isn’t big enough, compared with the market size, not being big enough, that that are combined. That’s a good reason to sort of say no versus Yes.
28:33
The other thing they mentioned is price. And I’m curious how your relationship with price has changed over the past decade of investing. And if you still say no today, because deals are too expensive,
28:44
we still do, but we probably shouldn’t give him like if we’re excited enough, we should do it. But I think 2020 and 21, and a bit of 22 brought prices. For certain rounds, it felt very different than at other points in my career. But I would have said the same thing in 2018. And there are certain prices in 2018. That felt very expensive, they looked less expensive and 2020 when you saw those prices, so I think in a career pricing matters in a portfolio of a series of funds pricing matters in a single fund, the blended pricing matters, but on an individual deal basis. I find it less important, the more expensive the price on the way in is, the bigger the outcome on the way out is to be important for fun math, and I think you just have to appreciate that. So funding something that feels like a small market and an expensive price. Tricky.
29:47
Yeah. The other question I have for you on this is where do you think prices are headed? Because everyone keeps saying prices are gonna go down. And you know, there’s still quite a bit have capital available at pre seed and seed, despite what people are saying around the consolidation here, I’m curious what what what you see happening in 23 and beyond, for seed pressing founders
30:13
should raise their seed rounds or pre seed rounds from people they want to work with, they should get enough capital, which is going to be more important if getting capital is harder, that you raise enough capital to see you through to enough achievements to get more capital when you need it. And three is at a price that you’re comfortable with and dilution you’re comfortable with. Those are the three things who how much and at what valuation, and I think you should try to optimize, you know, the ones that you view as most important at the end of the day, the difference between bad capital and Okay, slash good capital, which are sort of the same at the early stage, bad capital can really impact your business. And so the who should be something you are focused on how much is vital in a market where access to capital is harder. And so making sure you raise enough and don’t think you can thread these needles on milestones because of milestones move. You know, my least favorite thing is when an investor passes and said, you know, if you can achieve X, Y and Z traction, we’d be interested, make that person sign something that says, If I do X, by y time you get the money. I don’t think anybody’s signing that. So I find that to be a nonsensical soundbite that, that investors used to pass on companies are passing because the they are saying no. And so unless they’re willing to like, you know, write a futures contract for, if you achieve, you know, what you say you’re gonna achieve, or what I told you to achieve, I will give you money to take that pass with a bit of a grain of salt.
31:56
It’s probably one of the many nonsensical bass reasons, right? Yeah. How do you how do you define that capital, though, and if you have any investors, I’m
32:05
gonna get in your way of success. For their, again, putting their business in your way of your success. And so blocking future financings overcomplicating the structure in an early stage company funding in tranches with milestones attached to them, bad reputations, founders should ask other founders about investors and, and really, you know, make sure they know who they’re taking money from. People who’ve been doing this have reputations. And it’s important that founders ask founders who they worked with, and we’ve succeeded and failed. I think just asking founders who failed is wrong. And I think just asking founders who succeeded is wrong, because investors behave differently in each bucket. And I think, you know, it’s important to just do your work on who you’re taking money from. And I would avoid people that, you know, there’s a wide group of VCs professional investors, that are generally not out to do harm. And there’s a small group of professional investors that continually do things to harm companies. And then there’s a bunch of people that are not professional, that will do things that are very unsavory at times, and just try to avoid working with people that you aren’t confident will behave in the best interest of the company.
33:30
Do you? Where do you fall on the question whether or not early stage investors add value?
33:36
I think it’s up to the portfolio that you build to judge that, my hope is that our reputation is strong enough from every person that ever every founder, that we’re lucky enough to back that if you asked her him and the entire team, how has it been to work with Box group, they would say amazing, and we’d highly recommend them and whether their closest relationship on our team is with my partner near me, or my partner’s Adam, Greg, or ADINA, or Claire or Claire on our team. I think it’s really important that each of us hold ourselves to a standard where the people that we work with, will say that they would recommend working with us. I think that was
34:19
your question. Yeah. Hey, I value the last.
34:24
I don’t think VCs build companies, I think founders build companies, I think employees build companies, I think VCs are supporting to the founder, my customer is the founder. And my job is to service that customer, whoever they need, you know, wherever we can help our jobs to help.
34:43
Like you said, it’s much easier to be a VC and invest and say yes or no make a binary decision than it is to be a founder. Yeah, you know, the last question I had prior to proceeding is it over the past? I don’t know call it five years. The land landscape at seed has been shifting quite a bit multistage firms have been coming down since I don’t know 17 or 18. Somewhere in there, we’re also seeing an interesting trend. From the bottoms up where a lot of early stage firms are incubating companies to control entry prices. And you know that that has been a fluid model. What do you see happening over like the next five to 10 years? I mean, where you started 10 years ago, today is entirely different at seed. Maybe you disagree with that? I don’t know. But as you project into the future, that trajectory of seed, what do you what do you think are some changes that are likely to happen? Yeah,
35:40
I actually don’t know how different it is. I think there’s some nuances that are a bit different. There’s more, there’s more seed investors, and there’s more companies, you know, the nature of this industry has changed dramatically over the past decade, in that there’s just more things startups across different verticals. And there’s more investors seeking out early stage opportunities. But I think if you go back, you know, Sequoia Excel, Andreessen wasn’t really around in 2010. I think they were just getting started. But, you know, the biggest funds and the best funds have Founders Fund and benchmark here in there. They’ve always been investing in seed companies. And so I think there’s been a myth that like, this is a new thing for them. I think they will continue to invest in seed companies, the multistage firms multistage include seed. And I don’t think that’s going away, I think they have been willing to invest more money. So the amount to price out seed investors, which the traditional Seed Fund, which has created a challenging, competitive dynamic for a smaller seed fund to lead deals, when a multistage firm can sort of invest more at a higher price. I don’t think that’s going away. And so I think, if you’re a founder, the opportunity to work with a multistage firm versus a early stage firm is a complicated decision. And it sort of boils down to who win again, and how much and at what price that you’re gonna have to sort through that. And I think the idea that signaling risk is a reason to not take a multistage firm, I don’t really buy that, I think that you can work with a great investor that you’re excited about, and get enough money, and you build a great company, you’re gonna be able to raise more money down the line, it’s I don’t think that’s unique, you know, the small funds tend to evolve, they either get bigger, or they go away, or very few small funds, it stay small, and sort of hone in on what they’re doing at the very beginning forever. So somebody’s first fund typically doesn’t look like their second fund and doesn’t look like their third fund. Because if you’re starting a venture firm, you tend to have a vision and ambition for what you’re going to build. And that typically isn’t what you start with. And so I think, what you see over time, is it the people with first funds or small funds evolve. And so if you play it out, 10 years, some will be bigger and more important and more impactful, and some will go away. And that’s the nature of probably every industry.
38:09
Yeah. Okay. So prior to jumping today, I have to pick your brain on consumer, because we’ve had a number of investors on lately that have said they flat out will not touch consumer right now.
38:20
I would love to know, the lowest investing consumer content.
38:23
Yeah. Let’s talk about it. Why is that? Because I think, are they wrong?
38:29
I don’t know if they’re wrong, I don’t care about what they think I care about what I think, right, I need to lean into the things I’m interested in. And I think if you look at the biggest and best outcomes, and the most impactful company, so like, the world, it’s the consumer, internet companies, consumer software, and it’s been a minute, there hasn’t been a breakout consumer software company, that is, you know, social as the easiest category to sort of identify. There hasn’t been a new social company in a while, I think there have been existing ones that have gotten to some scale, but in terms of transfer, like, you know, transforming the world and scaling across the world. It’s been a bit and I think it’s right, nobody’s waking up and saying, Man, I love Facebook. It’s so fun. I think, you know, snap is home to a generation, but I think is a, you know, decade old company that is mature and I think has done an amazing job at times inventing really fun and new things. But it’s been more of a communication tool than a true social network. I think. If I look at what’s captured the hearts and minds of people over the past, you know, five years, I would argue iMessage is probably the strongest social network out there. And within iMessage, you can talk about WhatsApp and some group texts and things like that. It’s really you hear people talking about smaller networks, and I think that’s been a shove too. You know, this this version of messaging, I think fringes can talk about discord and Reddit. But it does feel like you know, if you go talk to a 15 to 25 year old and ask them what’s like, amazingly fun on your phone, you sort of get like, fake, non passionate answers. And I feel like, that’s an opportunity. I don’t know what it’s gonna look like, I hope we’re able to see it. And I hope we’re smart enough when we see it, to know it and invest in it. Because I would assume if if you fast forward 10 years, there’s something that started around this era, that’s going to be, you know, huge and capture the the hearts and minds of consumers across the world.
40:39
Yeah, it does involve photo share, photo share,
40:43
what do people like to send to their friends pictures, and whether it was pictures or memes, whether it was pictures or videos? It’s a simplification, but I think people like to share things with their friends. And I think if you ask where do people share things with their friends? Today? It’s on these smaller groups. And so is there a product to be able to capture that? That’s a bit wider and a bit more social than then not? Probably. And I think if you look at today’s social products, and Instagram included, they’re just, they’re big. They’re ad based, they’re noisy, a lot of it is brand and sort of big company driven. And I think when you ask people what they want to do, it’s like, talk to their friends with technology. And that’s what they spend their time doing when they’re texting and when they’re having. And I think figuring out how to pack into that in a consumer product, as we’ve seen in the past is, is quite the scaled opportunity.
41:36
Yeah, it does feel like consumers. I don’t want to say ignored by so many people are just looking for b2b SaaS, b2b marketplaces. Because it’s easy. Fox group
41:46
is open to consumer companies as dumb and silly. And note no two ever oscillating is they found the one where we were intrigued.
41:54
Does a particular pitch come to mind, like a consumer investment that and you don’t need to name names, but I guess what, what is a consumer pitch that? I don’t know, maybe it was wacky or a bit out there? Have you seen anything worth noting?
42:07
I mean, I think we are we take meetings with people who are interested in consumer behavior that have spent time understanding, you know, a younger generation, I think a lot of consumer pitches today are about you know, me and my friends. And when you ask somebody like, Oh, you’re building an app for you and your friends, name all the apps that you and your friends are on. It’s typically Instagram. And it’s typically iMessage. And for certain demos, it’s it’s snap. And I think Tik Tok is a entertainment platform like, I love Tiktok, you can go on Tik Tok, and amuse yourself. But it’s not a social platform. It’s a YouTube style entertainment platform. And so you’re down to like a handful of companies that have that right on one hand that you can count where you and your friends are on that app. So when you start a pitch with, like, I’m building an app for me and my friends. I don’t know, I don’t know how many outs you and your friends are on. So it’s a hard assumption to get there. And then, you know, when that person is not in a younger demographic, I don’t know how relevant it is. I don’t know how many consumer companies have been built off of the backs of not young people. I think virality happens amongst young people, young people can be 15, I don’t know, 25, it probably doesn’t get much older than that, where you see virality kick in, you can point to Pinterest is an anomaly. It’s a while ago, and Pinterest story is a quirky one. But it’s also like a decade plus old company. And so I think today’s Internet, the virality factor is me telling my friends to do stuff and telling my friends to check it out. But aren’t these magical, you shouldn’t channels that you can hack the way you could Facebook or Twitter in the early days to get distribution. And so I think if you’re gonna build something today, it has to spread via word of mouth and not to spread the word being this magical thing. And I think the generation that will spread that are young people. And so we are fascinated to see what, you know, 15 to 25 year olds want to do on their phones, specifically, less on desktop, because it’s a less scalable consumer platform. And I think finding people that are thinking about that type of behavior are very interesting.
44:19
David, if we could feature anyone on the show, who should we interview on? What topic would you like to speak about?
44:24
Sure, I think Y Combinator to me is the most interesting venture product, I think they’ve always been the most interesting venture product. And I think Gary at YC, who’s now in charge is, you know, new in and back again, and probably has enormous vision for what he’s going to build and what the team at YC is going to build. And I think they’ve continually pushed the envelope in terms of their product evolution, and we have a ton of respect for what they what they do and how they do it. And I think, whether it’s the accelerator program or YC continuity, they’ve just built a world class investment plan. form and differentiate a product in a world where everything sort of looks the same. And you know, Gary, Gary is at the beginning of his journey at YC, and probably has some fascinating plans for the future.
45:13
Yeah, yeah. I mean, they are. They’ve really built something over there. absolutely crushed it. And then last, David, what’s the best way for listeners to connect with you? Of course,
45:22
my email is David at Box group.com. And we are open for businesses, specifically consumer social ones, but also climate and healthcare and fintech enterprise and everything in between. We love the both big visions who are very early in their journey and getting to know them and hear how they think about the world. And thanks so much for having me on. This is great. Yeah,
45:43
this was a true pleasure. If we find the next consumer social app, we’ll be sure to send it your way.
45:49
Awesome. Thank you very much for having
45:51
me at the time. Thanks.
45:57
All right, that’ll wrap up today’s interview. If you enjoyed the episode or a previous one, let the guests know about it. Share your thoughts on social or shoot him an email. Let them know what particularly resonated with you. I can’t tell you how much I appreciate that. Some of the smartest folks in venture are willing to take the time and share their insights with us. If you feel the same, a compliment goes a long way. Okay, that’s a wrap for today. Until next time, remember to over prepare, choose carefully and invest confidently thanks so much for listening
Transcribed by https://otter.ai
