On this special segment of The Full Ratchet, the following Investors are featured:
- Larry Cheng of Volition Capital
- Glenn Solomon of Notable Capital
- John Chen of Fika Ventures
We discuss major conflicts that guests have faced and how they resolved them.
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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Transcribed with AI:
0:18
Welcome back to TFR. On today’s special segment, we discuss major conflicts that guests have faced and how they resolve them. Here’s the special segment called “High Stakes Conflicts. On today’s special segment, we have Larry Chang of Volition. Larry, without revealing specifics, talk about one of the highest stakes conflicts you’ve faced as a VC, why the issue occurred, and how it was resolved.
0:46
Believe it or not, and this is this is true. Most of my time and experience with my founders has been very positive. The joy of this business for me has been working with founders who are trying to change the world. And as an investor, I have a wide aperture, and I think you have to for how founders want to do things because if you want them all to fit into a box, then you’re almost taking away what’s special about them. But still, maybe my box is wider. But there have you know obviously a type of conflict as if the founder is not working out. And I remember when I was younger actually, and I was a board member with a partner on a company, and we had to replace the founder CEO at the time. I remember having to sit down with him, and then having to sit down with the entire management team. And let me just say, they weren’t that happy about it. Those types of decisions can be hard. Sometimes there’s there are more moderate disagreements on you know how much to invest and how your plan should look, and so forth. That’s I think that’s a more normal normal course type of experience where you have to have a good working relationship and you have to be willing to compromise. And in my mindset and those types of dynamics, the founder is the tie that wins. You know, and so so you want to back that. Sometimes there have been integrity issues along the way. I mean, I’ve been in this business for 2526, years, and those are the toughest ones, to be honest. I’d like to think everyone in this world has operated at least within a reasonable bound of ethics, and that’s not always the case. And so, so there are different dynamics, but by and large, it’s been it’s been really positive.
2:15
On today’s special segment, we have Glenn Solomon of Notable. Glenn, what is one of the highest stakes conflicts you’ve faced as a VC. Why did the issue occur, and how was it resolved?
2:25
So back in 2020, I led a Series A in a company called Streamlit. The terrific founders who were building great open source for data science teams that was very popular. Sequoia followed us, leading a Series B at a at a very nice, I think, 4x markup within a year, and then a VC that I won’t name tried to preempt a Series C within a year after that, at about a 2x step up to the Sequoia Series B. We plan to go through with the round, and we invited Snowflake, who’d been partnering with Streamlet, to come in as a strategic investor in the round, Snowflake came back to the company within a week and said, “Actually, we want to acquire the business. And they offered a billion dollars and and said, “Don’t do the financing. Like we want to buy the company for a billion dollars. The founders, you know, we had a lot of conversations together on this, and they decided that they wanted to take the acquisition officer offer. Sorry, the unnamed VC who had issued this term sheet somehow came to the ridiculous conclusion that the founders had to allow him to invest, even though they wanted to sell the company instead. And this person threatened the founders with a whole bunch of vacuous threats of legal action, and I had to intervene and to remind this misguided person that as VCs, we work for founders, and he was angering the founders. He risked ruining his his reputation, his firm’s reputation by doing this, and at that point, fortunately, he saw the light, and his boss called the founder to apologize, and they relented. But very poor form. Thankfully, they ultimately got to the right conclusion. But yeah, it was not not not a fun not a fun episode.
4:26
On today’s special segment, we have John Chen of Fika. John, talk about one of the highest stakes conflicts you’ve faced as a VC, why the issue occurred, and how it was resolved.
4:36
Yeah, without going to specifics, I think the hardest thing is co-founder transitions in companies or co-founder conflicts. You know, we had some that are were successful and that we found resolution for, and some that were messier. But ultimately, I think keeping it really objective and not taking sides too early is really, really important. We actually do spend the time trying to interview all of the people around. You know the the conflict as well, which means actually talking to executives directly and just trying to get a a broader sense of you know what what the founding team and the co-founding team can do better together and and try to really start from a place of facts. And so yeah, so those are always the hardest. You know, the people problems are always always the you know conflict inevitably emerges. You’re working in a high stakes, high pressure environment, but yeah, objectivity and and you know a steady hand is is really the all all we can all we can really do as outsiders, you know, trying to help the company succeed.
5:42
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.
