Warm intros and hot takes: It's time to get ready for fundraising season

0:03Hey, everyone. It's been a whirlwind August and there is no slowdown in sight. This week on Great Chat, we are asking, is Hustleculture back to stay? And for those eyeing a September fundraise, we are sharing some of our favorite do's and don'ts. Today, you have myself, Ashley, as well as Sally and Angela. But first, this podcast is brought to you by Mercury, the fintech used by over 200 ,000 companies to simplify their finances. We are huge Mercury fans at Great Chat, and we use it to run this podcast. A few of us are also current customers for our funds and startups, not to mention the dozens of founders we've backed as VCs, angels, and scouts that run their businesses on Mercury.

0:43If you're launching a startup or fund, visit mercury.com to apply online in 10 minutes or less. The onboarding couldn't be more intuitive or delightful. Quick note, Mercury is a financial technology company, not a bank. For more details, check our show notes. Hi, ladies. Hi. Anything big happening this week? Oh my gosh, I cannot even keep up with everything that's going on. And we haven't even hit the halfway mark in August. But I know I'm very excited about what Angela thinks about the Taylor Swift drop. Well, this week, it's really just great chat versus the Taylor and Travis podcast. So we'll have to see who gets the most views tomorrow.

1:28but yes it's been very exciting to see the the album drop happening and also just as a Swifty I'm really happy that she looks so happy on the clip from the podcast like I hope she's very cute this in love it's very sweet and just like the collaboration across podcasts and shows it's fun um but i mean the barrage of news um i know we talked about some of this the last few weeks but maybe the one that caught our attention this week in our group chat was the cognition ceo um email to the team what a what a hell of a weeks uh windsurf the windsurf team has had um so the latest of that is the hustle culture is very much back uh the cognition ceo has asked the team, the new Windsurf team, hey, like you better, you know, buckle up.

2:24I think it's they've asked for 80 hours a week or take a buyout to the remaining 200 of those employees. And so I don't know, it's and September hasn't even come yet. So I don't I'm curious what you guys think about that. Yeah, I think when you do something like that, of course, it sends a signal around expectations for the lack of work-life balance. But also it tells me that they probably want some of these employees to take the buyout, right? You don't like push a buyout aggressively with that messaging to people who just started after like a total whiplash, you know, multi acquisition journey.

3:06And so, yeah, so I think like that's kind of a clear signal that they don't want all 200 employees yeah i think it was very clear now that it wasn't the team that they were looking for that it was actually the ip of windsurf that they were really valuing so it's it's look at the end of the day i think it's just business um i'm just also imagining the just the crazy like back and forth of those employees um but i don't even think it's just the cognition team, I think we're hearing across so many of these different companies. We were talking to Helen about someone that she was speaking to over at Meta.

3:45And even the big companies are requiring people to be in the office or working six days a week. The Meta rumor was that it's seven days a week, but six if you're super, super high value, which is wild for a company that size. And I think that um it's between that and like the recent microsoft uh layoffs kind of feels like the the end of like the cushy whatever the new acronym for fang is job like people and startups used to joke about like doing like a mini retirement or a sabbatical like google or facebook or microsoft and whether or not that's fair like i don't know but the the perception was that those jobs would be far less taxing than startup jobs.

4:35And I don't think that's the case anymore. The 996 culture of Chinese companies working 9 a.m. to 9 p.m. six days a week is now 007, which is working from 12 to 12 seven days a week, which it's just interesting to see. And I actually wonder how much of it is driven by the fact that so many of the employees, a lot of these startups, And frankly, at Meta are like Chinese researchers, Chinese ad tech folks, and how much of that culture they're bringing and this drive that they're bringing to the companies here. I remember talking to an early employee, Hey Jen, which is, you know, a basically like a Chinese company with a U.S.

5:19wrapper around it. And she was saying one of the hardest parts was dealing with the intense work culture. And in the early days of TikTok coming to the U.S., that was a big cultural adjustment for U.S. employees at TikTok because similar to the Chinese company, they worked six days a week and that was a big adjustment. So I think this trend is here to stay. One of the topics we wanted to talk about was the fact that there's just been also so many different product announcements with, you know, GPT-5, the new cloud models. I was looking at the leaderboard of all the LLMs and even the image and video models.

5:55And even though there's so much focus on these U.S.-based foundation models out here, you look at some of the performance or the benchmarks of these, a lot of them are Chinese companies. And so it is also this like neck and neck competition between China and U.S. with the research teams. And so the intensity is certainly, certainly on. And I think in order for people to compete at the space where things are moving so quickly, products are being released so quickly that you have to, I don't know, you just have to be, you know, on that same pace in order to keep up. It's such a contrast. The New York Times just came out with an article about how young computer science grads can't find a job.

6:37Like the gap has never felt so wide where on one end of the spectrum, people are working crazy and have never been busier. And then on the other end of the spectrum, people literally have nothing to do, no jobs. And it's a weird state of the world to live in. Speaking of all of the product launches, should we talk a little bit about the reception to chat GPT-5? because I think it was, I mean, unexpected and including unexpected to Sam and the OpenAI team. I think the remorse that people felt for suddenly losing access to the old models was like a more emotional response than anyone anticipated for a technology product update.

7:20I really want you guys to catch me up. I was totally offline in the mountains with no cell reception this weekend. So I'm curious, Sally, like what what the T is on the on the feedback. I was actually reading Casey Newton's newsletter this morning, which I didn't get to finish. But I think one of the sentiment was around the tone and the personality of GPT-5 has shifted. And before GPT-5 even released, when Claude released their new model, they sunsetted their last models and they sort of did this like funeral for Claude 3. And, you know, it was just kind of this like almost like very uncanny valley or like Silicon Valley HBO kind of storyline.

8:03But then with this new GPT-5 and you have a very like emotional, like different personality, especially when a lot of these, you know, real people are using ChatGPT for real things and real conversations. And you've developed a relationship over time and then you all of a sudden are interacting with someone new. this is kind of the new reality that the labs need to face is as they think about building these models that like personality consistency might be something that people are going to be very tuned to i don't know actually what's sort of your takeaway by the way also before you um actually we get to you like i was also really excited to see so many like female ai researchers at the gpt5 announcement so i just wanted to make a shout out about that but yeah i mean i will say personally as like a heavy user of chat GPT I have not really noticed that much but I think I am using it for much more sort of like factual research-based tasks whether it's personal going down my little like health rabbit holes or for or for work and I think a lot of people are using chat GPT as like a therapist a companion and so the connection with the model and with its voice and how it interacts is like actually pretty profound.

9:20And I, you know, I've been like hearing stories, especially about younger generations, sort of like consulting Claude or ChatGPT on big life decisions. And it makes sense if that's your use case, the personality of the model. It's going to feel, it's going to feel really like sort of human and like it's a relationship. um I also read Casey's article I thought it was really interesting and he had a bunch of recommendations for like the model providers that you need to like give people a couple months heads up before you take a model away ideally you give them access to like prior model it's like this whole new like we we didn't do this with like app updates or software updates but it's like this whole new world and then the last thing I'll bring up which I loved because it was kind of like science fictiony was um I don't know if you guys have followed Rune he's like this shit poster guy um but he was saying that a lot of the protests about I think it was um GBT4 going away specifically were like written by like you could tell they were written by that model and so to him it actually felt like the model was advocating for itself through these like users.

10:40Like, and I, and I was like, oh my gosh, wow. Like we are, we are in, we are in black mirror right now where the model is like getting the humans to share its, um, you know, its case for, for letting it stick around. So, um, I, you know, I haven't done that research myself, but I, I was like, that was my, oh shit moment of the morning. Oh my gosh, literal chill. That's terrifying. And also, this is now a conspiracy podcast and I'm here for it. I think we'll have a lot of fodder if we want to go down these conspiratorial rabbit holes. I don't even think a lot of these is conspiracies. I was just talking to a friend who has a startup in SaaS space and he's been coding just various agents who are now managing a group of agents and so he's got four agents that are that have a team of 10 agents that they're tasking them to do things and and the interaction between the like various agents and one trying to like punt off work to the other it was just like it felt very very black mirror but it's happening at all these early stage companies and and soon adopted across i think you know pretty much every every company and startup so i don't know it was just fascinating fascinating to hear they spun these agents up within like a day.

12:00Speaking of all the models, do we want to talk about, you know, cursor and all these coding apps and all the negative margins? I don't know, Angela, if you saw that story. And what I thought was notable, which I didn't see much pickup on was the fact that the cursor CEO was on during the GPT-5 announcement working with GPT-5. And then And I saw that I think it's one fifth of Anthropics revenue is coming from Cursor and Copilot. I'd be curious to sort of see like how that transitions. The pricing of GPT-5 obviously is in much, much topic of debate. But Angela, I'm curious what you think about that.

12:40It's so interesting. I feel like there was some large group chat with a bunch of journalists that all decided to publish the story about negative margins at coding companies. this weekend, it felt like there was a lot of press coverage around it. And it's something that we talked about in our group chat. And to me, it's reminiscent of 2021, where VCs were essentially subsidizing all these companies and like a hundred million AR company in actuality was probably just a 10 million AR company with a lot of VC subsidies. And it feels a little bit like this in the coding space too, which is there's a question as to how durable that revenue is when it's really like Thrive and Andreessen that are subsidizing it for the whole community.

13:24And so I think it's interesting to think about from the perspective of Cursor and Windsurf and others, but also what was less covered in these articles is, to your point, Sally, like the implications for Anthropic, because I do think that this is a substantial portion of Anthropic's revenue. And if this revenue could go away when the funding environment turns or is not very sticky, then it's not very high quality revenue. And so it's interesting to think about given anthropics raise right now as well. I keep hearing more and more people want using cloud code directly more so than cursor. And that's the other debate, I think, is that none of these engineers using these code products are loyal to one product, and it's quite easy to move back and forth.

14:08And so we're sort of still in this early stage. And OpenAI also released their own version of code. I forget what it's called, the GPT code or something. It could look very different in six months, 12 months, where even some of the high-flying companies, where they will be in a few months. So the battle is heating up, and Cognition wins serve, obviously, another player in that race. Yeah, I mean, I'm obviously biased, but it's just interesting how quickly the news turns. I mean, Cursor was unavoidable in conversation in the press for a period of time. And then the drama of Windsor, I think everyone felt like OpenAI was really slipping behind Anthropic.

14:55But then with the release of GPT-5 and these questions around, you know, the sustainability of the business models of all these companies, it feels like the narrative is turning. And to your point, it's going to continue to go through twists and turns. So it's a very, very exciting time. Clearly not a slowdown in August. but I know a lot of founders that we've all been talking to are getting ready for, you know, fundraising in the fall, starting September, and it's going to be very busy with fundraising events. You know, our calendar is going to be in full swing. So we thought it'd be a good time to dive into maybe some of the good practices of running a successful fundraise.

15:35I think it's also important to note that like, there's no one right answer to any of these. It depends on company profile, It depends on CEO, the prior relationships people have. But I think just bringing some of the things we've learned along the way, things that have worked well for founders based on their performance. So maybe just like the first question is starting with like the prep that goes in before kicking off an actual fundraise. You know, how should founders be thinking about, OK, in two weeks, in three weeks, I'm going to start fundraising. What needs to be done? Well, hopefully you're not starting to think about it two weeks before you're starting to fundraise because I think that would be a pretty tight window.

16:22I mean, I have a bias for the extreme early end of the spectrum. So, Angela, I think you're going to have very different expectations for what kind of information founders bring to a fundraise at the growth stages. I would say the number one most important thing is like don't test out your story in pitches like you know for for pre-seed which is you know where I'm primarily focused these days a lot of times it really is the narrative that you're investing behind you know there's a deck or a memo there's a founder there's their personal story for why them why this problem why now and you can tell when someone is like really comfortable telling that story with like high conviction and really clear thinking and depth of thinking.

17:12And, you know, sometimes someone's just like a really natural storyteller and super charismatic and that's where they spike. But everyone can get there. I think it just you need reps, you need feedback loops, you need people to push you and ask you hard questions. And so I think if you're a very early stage founder and you're raising your first institutional round, ask some founder friends, ask some VC friends who maybe this is like too early for them to like go through your pitch with you. If you have some angels on board, have them help get you ready. But I think it's, you know, when you are so, this is your world, you're thinking about it every day, taking that and making it a story that's accessible to someone who isn't deep in the weeds with you is not necessarily a natural thing.

17:59And so, yeah, getting your reps in. I mean, Sally, you've done this on the founder side. What did prep look like for you for your first fundraise? For the first fundraise, we hired a deck designer who was well regarded. They were spun out of first round capital. I had a lot of founders who have used them as well. And that really helped with the narrative and storytelling. I will say, I was also talking to a friend of mine who just raised his company, they just raised$10 million on a four page memo, not an AI company, and from a top tier fund. And so, you know, as you prep, do this narrative thinking, you got to do what works for you.

18:47He walked me through the storytelling, the memo and it really resonated well and it was very clear on the market that he was going after I think for us we almost like early on rely too much on the deck narrative that someone else helped was helping us put together um and then we actually through the repetition that we had done we we did a lot of practice runs actually Angela we came into your office um to do a practice run with you and one of your colleagues. And that really helped us really sharpen the narrative. And that takes a lot of time for you to really hone that out. And I think that also bleeds into when you actually do start a fundraise, you want to reach out to some of the, you know, not the like top, you know, tier one funds at the very beginning.

19:37You want to space it out so that you have, you know, you're going to get similar questions and similar repetition. And so use that as sort of like a next layer of practice rounds where it's like lower stakes. And then you, by the time you're in week two or week three and talking to the top tier funds, you're really crisp about your story. You know, the questions that you're going to get and you know how to answer them in a succinct way. And I think that's some of the mistakes that I've seen is they're like, Oh, I want to talk to the Sequoias and Andreessen's and the, you know, thrives of the world and they line those up first, get really excited about it.

20:15And then they sort of fumble because they're getting asked the questions that they're not prepared or they haven't formulated in their head in a succinct way. Maybe a very tactical suggestion I've also heard from the founder side is just to make the life of the investor easier. Like every firm is going to have some template or format of an IC memo that has, you know, like the addressable market, the innovation in the product, the team. And if you can package some of these points in a way that's very easy for the investor to pour into their own IC memo or process, people like shortcuts when they can find it.

20:57And so if you can weave that into your narrative structure, that sometimes just makes it easier for everyone as well. So the time has come that you have all prepped, you're ready to go, and you're ready for your outreach. If you don't have a warm intro to a fund you want to talk to, what's the best way forward? Should you do a cold outreach? Who should you reach out to? And how should you strategize? Ashley, your thoughts on that? Yeah. I mean, venture is very much a warm intro industry. And part of that is just there are so many startups pitching at any given time. and VCs are looking for any sort of like shortcut to see signal.

21:36My hot take here is that a lukewarm intro and like a forward from someone who doesn't really care or like even someone who passed is way worse than a good cold email because that is signal on its own. And so I would say warm intros that are enthusiastic are amazing. I mean, the best kind is like, Sally, if you've backed someone as a scout and you're sending it to your favorite investors and you're like, this person is amazing. Like it was the easiest yes I've said in the past, you know, like two years. Like that counts for so much. If you're just forwarding, you're like, hey, this person wanted to chat.

22:13I'm like, you know, I'm not investing. I'm not taking a look, but like just passing along in case you want. I just like, I don't feel like that's helpful to founders. And I get a lot of requests to make intros if I'm not investing. And I always try to be really clear. Like I'm willing to do it. But if you can find someone who like knows you and is excited about you and can really like bring a lot of enthusiasm and authenticity to that intro, it's so much better. Otherwise, great cold email that's really thoughtful and shows you understand what that investor cares about, what they're focused on.

22:46I mean, we've invested based on cold emails, cold DMs. Like I'll take those any day over like a very sort of unexcited warm intro. Yeah, I agree with that very much. I'm talking to a founder right now who's looking for, who's starting their fundraise and I'm super excited about what they're building and they have a really great track record. It's such a different, even just the tone of how I write the email to forward to an investor that I respect for someone who I'm really excited about versus someone who has asked me a few times where I've been pretty clear of like, hey, you know, I'm happy to, but, you know, if there's another way forward.

23:30I think also just in terms of intros and things, this was a topic that came up in a group chat about, you know, getting intro to, you know, associate versus a general partner. And I think it was a, you know, and I think some people just want to be intro to the head of the fund, the headline name. But it's actually it's very different how things are triaged. So Angela, maybe just given your background over at SoftBank, what your thoughts are on how you guys triage some of the founder intros, the first level of diligence? It's a good question. I feel like this topic has come up in a few group chats recently.

24:15So there's something in the water about this topic. I think it probably really, first of all, just depends on how your fund is set up. I think at most of, I'll call them like the bulge bracket VC firms, the associate network is very strong. Like everyone's on the same group chat. Everyone's in the same email list. Like if you go pitch Lightspeed, the associates at Andreessen and Sequoia and Thrive will know about it right away. And that's actually how like a lot of the whisper network and venture gets passed around. Associates are generally more flexible about sharing information and they're like, you know, chatting all the time.

24:52And so I actually think it's a really powerful network if you tap into it correctly, because they'll be in the flow in a way that a lot of the general partners aren't in the same way. So I think associates can really be your friend. In general, I think the most successful entrepreneurs I've seen understand that it's important to have relationships at multiple levels. Like if you just have relationships, the top person, there's only so many requests you can go to. you know, if it's, let's say at Andreessen, if it's Mark Andreessen, you can't like text Mark every five minutes when something goes wrong.

25:27Like you need to have a relationship at the working level to be like, where's the term sheet? Like what, you know, like, and so I just think it can be short-sighted to only focus on the check writer. I think it's really important, but I think you gain so much from having relationships at a lot of different levels. And like at the larger firms, The associates are the ones that are writing the memos, that are building the models, that are going to be advocating for you. And so you definitely want them on side. But I think it's not either or. It's important to have relationships across the board.

25:58Oh, just a fun little tidbit. Mamoun Hamid led the Series B of Vox. And it was like a very early Series B. It was like 19 million posts or something like that as an associate at U.S. Venture Partners. And like basically no one else at the firm wanted to do it, but he pounded the table and sort of bet his career on that investment or his career at that time, obviously. And so it's an example. And also like was an incredible board member for, you know, for for so many years, reinvested when he was at Social Capital, like and then, of course, went on to have this like phenomenal venture career. And every time this debate happens on Twitter, because it's very like people get very emotional and heated about this.

26:45There are always incredible stories of like associates who sourced deals that ended up being like fund returners. And so I think the thing I'd say that's like kind of like the practical thing is like if an associate, the super shiny founders are probably not going to take meetings with associates because the firm also isn't going to want that. And so in Box's case, they were fundraising in 2008. It was a terrible market. Like they did dozens and dozens of meetings, got so many no's. And so like that is an environment where like an associate can do a deal. He's not like competing with like GPs at other firms.

27:28And I think today, like, you know, if you're a founder who is not like super pedigreed, like easy box checked for the shiny brands, like they're going to be more willing to spend time with associates who are super hungry and excited and maybe like really drawn to what they're building. I will also just say that as a GP of a small fund, some of my best deal flow comes from associates who like can't get deals done at their firm. Like they find founders they're super excited about. Maybe those companies are too early. Maybe it doesn't fit in like their GP's sort of sweet spot. So like as an investor, those relationships with really sharp associates who, to Angela's point, are super plugged in is something I focus on as much as I focus on like the GP and like, you know, fund manager relationships.

28:16And so don't sleep on associates. I would just say that this extends to board members as well. Like that's the other extension of this question, which is who should you have on your board? And I was talking to a GP at, you know, a tier one fund and he was on a board with someone from Sequoia, like a GP from Sequoia. And he joined his first board meeting, like so excited just to hear the pearls of wisdom that were going to come down from the mountain. And I think he was on his iPad for like half of it and, you know, maybe ask one question. And, you know, it depends on the company and the meeting, but it's just, you know, people have a lot on their plates.

28:53And so it's something to consider in terms of what you need and what the right composition is for your board as well. And so maybe it's not the associate, but it doesn't always have to be the most senior person at the fund either. And Angela, I'm curious, in a more growth stage company, you already have those relationships, you know, for years, in many cases, before you start thinking about your Series B, Series C or above. How is the growth stage approach different in your mind? And how are they starting to prep a few weeks before actually talking to Angela over at Southbank? I think growth is such a big category as well.

29:35It covers a pretty large, expansive companies. But in general, by the time you're in the late stage growth, you have solid metrics. You have a narrative that's gone through multiple rounds of fundraising. So people are just a bit more ready. And, you know, it's funny, like when you walk Masa through a presentation, like his famous line is just like, show me the numbers. And so I think that's a little bit of the growth stage investing, which is like the narrative is great. And we want to understand the narrative, but like, show me the numbers. So if you're a consumer company, we want to see your retention.