On this special segment of The Full Ratchet, the following Investors are featured:
- Kevin Jiang of Mangusta Capital
- Barry Schuler of DFJ Growth Ventures
- Chris Rizik of Renaissance Venture Capital
We asked guests for the most important piece of advice that they’d share with folks early in their venture career.
The host of The Full Ratchet is Nick Moran of New Stack Ventures, a venture capital firm committed to investing in founders outside of the Bay Area.
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Want to keep up to date with The Full Ratchet? Follow us on social. You can learn more about New Stack Ventures by visiting our LinkedIn and Twitter.
Transcribed with AI:
0:19
Welcome back to TFR on today’s special segment, we ask guests to discuss their anti portfolio, a startup investment that they passed on. Here’s the segment called Why I passed
0:35
on. Today’s special segment, we have Kevin Jang of Mangusta capital, Kevin, can you tell us a story about a startup that you passed on
0:43
absolutely well, it’s a company that I still remain very excited about today, and so, you know, it’s a company that and a founder that I have a lot of respect for. It’s a company called Zeit view, z, e, i, t, v, I, E, W, and at the time at Softbank, it was unfortunately too early stage for us to invest in. But now we are continuing to stay in touch with the company. I still remain really excited. And essentially, what they do is they are providing visual AI as well as drone image capture to be able to help asset and infrastructure owners be able to maintain and capture data on their major assets, whether it’s wind turbines, solar panels, other commercial real estate. It’s a really interesting business, especially in this era of using AI applications to be able to drive value for large industry incumbents. Because, as you can imagine, manual collection of this data and analysis of this data is extremely dangerous, as well as time intensive, and so it’s one of the companies that I’m really sad we passed on at Softbank, but I’m excited to continue to find ways to collaborate with and hopefully find a way to invest in the near future.
2:11
On today’s special segment, we have Barry Schuler of DFJ growth. Barry, can you tell us a story about a startup that you passed on? Oh,
2:19
gosh, yes, early, I think, and it was our first or second fund. We had the opportunity to do LinkedIn, pre revenue, and I think the valuation was about a billion, which was to us, we like, we want to exit at a billion, not and. And we really tortured ourselves about, about, about doing, doing that deal and and in the end, we just couldn’t get around not seeing any revenue signal, even though the ad model, you know, that was being developed by Facebook was applicable, etc. And we ultimately passed on that one that we we track our anti portfolio. Snowflake was another one. We had a good, clean shot at snowflake early on. We liked it, I think at the time, you know that negative margins, or you know something about their unit cost structure was, was getting our team tweaked up, and we, we passed on that. That one too. Fortunately, the successes have outnumbered the negative portfolio power law.
3:31
On this special segment we have Chris reisek of Renaissance, can you tell us a story about a fund that you passed
3:37
on? There’s a lot of gray in my hair. There’s negatives to that. The positives is, you know, haven’t gone through cycles. And we saw a lot of really smart people in firms, particularly during 2020, to 2022 who had gone through their entire careers, never seen a downturn, because there hadn’t been one in a dozen years. And so I’m thinking of one in particular, where firm was pitching us, and they were talking, we were looking at their portfolio, and I’m just kind of doing some math in my head, and I’m looking at their portfolio, it’s like you paid 30 times revenue for that 140, times revenue for that one. Those are the valuations you’re getting in. And you know, if you’re a great firm, and they’re getting into not they’re getting into like, series late a’s and b’s, and at that stage, as you’re thinking about exits, certainly, you plan your companies to grow, and so the growth in revenue helps you. You should also be looking at growth in multiples. And if you’re paying 40x you know, you’re going to have multiples compression. So you’re putting so much pressure in that company. And we pushed them about, okay, you know, I see the multiple as you’re you’re getting to these companies. Those are traditionally, like, off the charts. And the answer that we got back again, smart people, but they said, we’re getting in the best companies. We have valuations to take care of themselves and best. Just not true. It’s never been true. It you know, if I take care of itself for the next six months, there’s always going to be a reset, and we’ve experienced that reset interestingly, when that fund in particular was pitching us their prior two funds were sitting at incredible IRRs and moecs and looking at them now, three years later, all those prior funds are underwater, as is the fund that they were pitching us on. So it just not I’m not happy about it. I mean, we certainly made the right decision. But that kind of thing happens every bubble and venture you know, there were, when you have bubbles that are 10 years apart, you’re gonna have an entire generation of venture capitalists who just haven’t experienced the downturn. And it’s tough. Your first downturn is tough. What
5:47
do you think we’ll see long term with the 20 and 21 sort of vintages? You know, they’re already looking pretty embattled. But how are those gonna net out? Yeah,
5:58
I mean, certainly those people who were investing heavily in those years, it’s going to be tough. And getting back to your co investment, there’s a there were a lot of huge co investments in those years because the rounds were so huge, and there were a lot of crossover investors because the rounds were so huge, none of that’s going to work out very well. Now, those who are coming into those when those companies ultimately have to raise again, whether it’s 2024 2526 the people who are coming in now reasonable valuations de risk technology, those people are going to do pretty well. So those companies themselves may have okay exits, but there’s going to be a pretty big divergence among their investors as to how they do
6:48
that will conclude this installment of investor stories. If you’re enjoying the program and would like to see it continue, take a moment and leave a five star review in iTunes. Okay, that will wrap things up for today until next time over. Prepare, choose carefully and invest confidently. Thanks for joining me.
