20VC: Investing Lessons from FC Seeding Uber, Airtable and Coupang | Why Pro Rata is the Original Sin in VC | Why Liquidity Has Died in 2024 | Why LPs are Pissed with VCs | The Hard Truth About Seed Fund Economics with David Frankel @ Founder Collective

24:13I was in this board meeting the other day And they're like, but we've done this this and this and so we should be double our last round price And I'm like, I understand your rationale, but the market has moved. And it's like they can't get their head around the fact that external to them totally, the market has changed. Well, the listed markets change completely. So if you look at SaaS multiples in 21, 20, where that was 20X, and then you look at those SaaS multiples as 5, 6, X, that trickles down. So later stage investors that invested in private at a billion and expected that rule of 40 to be at least profits and huge growth all the time.

24:50And that has a materialized. They're looking at those same companies who are going out for top -up rounds and they're going, why would I top out at the last valuation? Or they're saying, again, go to the market, see what the market will bear. We've seen down rounds in companies that got valued enormously, hugely. Goes back to at any point, your own your own destiny by minding your monthly burn. I love that. Can Venture Survive unless we get the reflation of public market multiples? So this is a great question. I think that DPI could be dead, right? And let me clarify that. But I think a lot of LPs look at 2018 plus funds and they go, where's the DPI?

25:33And I think that what happened there was a perfect storm. I'll fund three as a 2018 vintage, no DPI yet. And what happened is if you look at Fund 1, Fund 2, five, six years in, we were giving DPI. It wasn't even our biggest hitters, but we were giving through companies like Cruz or desktop automation that you've never desktop metal in Fund 2. Through companies like DataLot and InfoSkout, we were already giving significant DPI. That's way before we got to Uber, Trade, Desk, Coupon. And we haven't given DPI, by the way, in all companies like SeatGeek, AirTable. But you look at 2018 plus funds and the problem is it was this perfect storm So we were preparing we were getting involved in companies that had lots of potential and then 2019 2020 ZERP comes along day trading at home over COVID and 10 on 40 10 on 40 20 on 80 Tiger looks at a 16 Z and goes you know They have 10 on 40 will do the 20 on 80 soft bank and that was the apotheosis But at every stage the money was just going out like crazy.

26:39Did we do founders favors? Like no, no, no, no. That's the 2018 plus vintage. So LPs at every stage I think are looking at this thoughtful piece. And they still want to get into good funds, so they're not being as direct with the managers. But they're looking at this and going like, show me the DPI. Harry, we've got no DPI in fun three yet. We've got an L .O .I. in a vertical SaaS business right now. L .O .I. we haven't got this is not there yet. The company's done tens of millions, it's got a good valuation, it's PE, it's all PE. There are still PE players who are now looking at a vertical and going, I like that vertical and they seem to be quite disruptive in that vertical and I can tie them into XYZ company where I'm amalgamating a whole lot of companies and they're the tech play.

27:24So we've got PE in this company with us and they're going to ultimately sell to like a bigger PE and they've got a 1X lick pref and they won't take, they're literally shunted into the bigger company because I think their outcome could be better. That's how M &A and DPI is going to start to happen though. But how do we solve this? When Alps are asking you, David, liquidity. Where is the liquidity? How do we solve this? Because IPO markets are not opening up until age 225, I think, in the early days would be wise to say. And then M &A markets are not open. Really, I didn't. Yeah. You know, there's the saying, like, one swallow doesn't make a summer.

28:00And I kind of like think, no, no, no, no, no, no. One swallow can make a summer. So think about this optimistically, one good IPO, and everyone will go, hmm, IPO markets are open again. I think pre -election in the US, IPO's are pretty much closed for now. I think post -election, one or two or three great IPOs, every single, you're going to have like the swarm of JP Morgan and Goldman Sachs bankers coming to tell you like, it is open. It needs to be a Mac. Yeah, an insta -cort won't do it. No, there are tons of four, five, six billion ones and the seat geeks being IPO ready for two years. But two years.

28:36No, that doesn't really need to. It needs to stripe, it needs to starlink, it needs to space X. Yeah, the minute that happens IPO will be open. But I think that happens also Alpys are open because there are so many Alpys who have positions in those companies. Alpys are pissed off at the moment. Alpys are looking at this asset class right now, I think, and going, where is the DPI? And they did unbelievably well, and some of them are scared to set it out, and it depends what kind of Alpior, If you're an endowment or you're like a par - you know, parastatal or something, you've got to be in this asset class and your allocation can still be tiny.

29:09But I think LPs are looking at this right now. I'm going where is the DPI? I -I'm looking at the 19 -20 -21 though. And I'm in a couple of funds. You're in a couple of many funds. I don't think that it is a DPI delay in a lot of cases. I think it's a permanent loss of capital that we're actually trying to avoid. I think vintage matters so much. I look at our 2020 fund and I go, So that's actually going to be okay. 2018 fund, I'm much more worried about that. We need DPI there. I agree with you. But I think what we've seen is like the more polarisation than I've ever seen in my career before. We've seen this completely binary outcome thing where companies are losing it and companies are doing very well.

29:48And to return these seed funds, you can't just have these huge, it's great for PR, it's great for your story to say like I was in XYZ great company. But actually fund returners you need four or five good fund good companies if we sell four companies at 250 million dollars each we can return a fund if we sell 10 companies at a hundred million each like nobody cares about that We can return a fund and if you don't have that you're in trouble again So the everyone always says in venture you need your fund returners This is what the business is about are you saying that actually that's not true You can't have these dummy fund returners these ones that return 25 30 40 so look Harry I will be infinitely grateful to have been in Uber.

30:33My gratitude to Eric knows no boundaries in fun too. So how many times did Uber return the fund? I mean, Uber's just in itself. Yeah, it's just, that's incredible. Tradesque was a bigger outcome for us. Coupang returned the fund and multiple times. If I look at, and then we've got in Seat Geek and Air Table potential fund, you know, fund returners again in fund one. But Harry here's the thing is, Pulpac returned fund two. I am so grateful to Elliot and TJ. Pulpac returned fund two. Yeah. Wow. I mean, we were in at the beginning of Pulpac, right? So we were the largest institutional pre -seed and we co -led the seed with Fred.

31:12But this is the other thing that people aren't talking about, which is like, it did for you, because you've got a 75 million fund. But I know a lot of people, I get, I love index that great, but indexes seed fund is like 500 million. Yeah, 400 million? Yeah, just that same one returns, that's 25%. Entrepreneurs need to do the math on that as well. Entrepreneurs need to be doing the math on that. Goes back to our point is, if you take 20 million from a billion dollar fund, right? Do you move the needle for that? What does it take for you to move the needle there? And if entrepreneurs get a 10 million dollar check from XYZ large scale fund and a partner doesn't join the board, that is not a good signal.

31:51I think if a partner says, I'm putting in five million dollars, and I'm joining your board, right? Like everybody goes like, you know, multi -stage firms first seed. I think there are other ways, if a partner at a multi -stage firm, billion dollar firm says to Harry five on 20 and I'm gonna join your board, I would say that's a strong signal. That's very tough for me to compete against. They're saying to you, I'm gonna spend time here. Like admittedly, as long as they're not on 20 boards. But are they, I mean, respectfully, I know many of these mega funds, they never show up. But some of them show up.

32:21Some of them show up. And I just want to give credit where credit's due. There are people who show up. Then there are people who are very disciplined say, like, I'm not investing. Again, percentage of the fund, and what it takes to return that fund, is very indicative of whether you'll get time or not. Like, we just want to series A. And I said, you should take our jack because this is 7 .5 % of our fund. Right. But you really matter to me. Yeah. I think for entrepreneurs and for LPs, size of fund, check in company, Versaiser Fund tells you everything everything what happens then to LPs because they continue to invest in the asset class They're not actually pulling back how does capital deployment from LPs changes the results of the illiquidity?

33:03It depends on who those LPs are endowments pension funds use the endowments are turned off though. They are dialed back They've dialed back a little But I think they'll always go look we have to have one or two or three percent in VC Oh, well I think way more don't owe more I'm going minimum, absolutely. If you look at the Swenson model, VCP was more like 30%. I'm getting on a high horse. This is a big problem, though, which is they all looked at Swenson and thought, hang on, we can replicate this incredibly heavy 35, 40 % allocation. But that was in a time when liquidity was much better. And actually your hit rate on selection was much better.

33:42Now your hit rate is way lower and you have a real illiquidity. Yeah. Well, so you've seen, you know, high net worth family offices pull back even more. I think the vintage just matters a lot. And some of the large LPs will be scared of sitting out vintage. It's kind of like the Axel, you know, fun seven era, you know, so I sat out and I missed Facebook. So I think sometimes if you think you're in as an LP and a great fund, you may lower it, but you'll try to stick around. But you've got to keep up your track record. You got to be a great fan. Do you mind LP's bowing out in those cases? We're so small that in some cases we welcome LP's bowing out.

34:21So in our last fund, in fund five, we had one fantastic family office. We love and adore them, say, if it's less than 10 million, we're out and we went, it's less your allocations less than 10 million, they're out. A fun small, we don't mind. Harry, we spend a very, very small amount of time on fundraising. If you ask me, I spend truly 95 % of my time on finding good companies and supporting good companies I think I spend 3 % of my time on fundraising. But doesn't mean I don't care about ILPs. I'll talk to ILPs any day of the week and I love spending time with them, but I'm not out there fundraising.

34:53But the secondary markets then are like more alive than ever. Almost to the point where it's the most obvious market to go into and all ILPs like we're superimpressed in secondary sound. How do you think about navigating secondary markets? Is it the duty of us seed funds to be very active in managing positions portfolio exits? I'd say the first thing is, secondary is so elusive. Like if I think of the secondary we've had over a career, I can cut it maybe on two hands. So secondary tends to be in your, and by the way, do you mean companies or do you mean funds? I mean company actually. Yeah, so it's elusive.

35:30Like in your high flyers, So in your really well -known companies, there's a real secondary market. Try to get secondary in your smaller private company. It's almost impossible. So I found secondary to be very, very difficult. Where we've done secondary, they've been pre -IPO, really high flyers, the secondary markets all over them, and then you fall off a cliff. You mentioned like, you know, the companies that raise from, you know, your tigers and your Andresans and your soft banks and then have these down -arounds. Because what happens to all of these companies was seven years of runway, which kind of aren't heading.

36:04Are we about to see this decimation of them? Do they just kind of plateau into the unknown? What happens? It's funny. You think about product market fit as in the early stage only. But if you don't maintain product market fit and you don't maintain growth, right, it just becomes... Most of them never had it. Yeah. Well, the ones who didn't have product market fit, they're being abandoned. At some point, like their boards start to abandon them, or they just get incredibly frustrated. Some of them, frankly, it's at every single stage, late stage, some of these companies of IPO'd even. And then you really know what that looks like because the market walks away from you.

36:43In some respects, being private then is a luxury, particularly if you've got a lot of money. But if you're burning it fast, it's just a matter of time, Mary. Do you think we're seeing a generation of VCs quite quit in companies? in these companies they just get, pff, I'm out. I do, I do. Is that a problem? I think it's for the entrepreneur, there comes a point where it's like you can have, it goes back to your earlier question, you can have words, you can have as many discussions, if the business is just not working out, do you expect your investors to be around, that comes back to relationship, I think.

37:18That comes back to some degree of sentimentality. And if you're purely commercial about this, the investors are moving on down the whole ecosystem, the LPs, just like the LPs are moving on, the investors in those companies. If I invest in you and we're personally still involved and I'm going like, Harry's gonna get this right at some point, maybe it's this abundance of faith, maybe it's crazy and sentimental. If I believe in the call option of Harry may just still get this right, maybe I'll stick around. We mentioned coupang, we mentioned Uber, we mentioned the trade desk. I love our mutual friend Avi for his framework around actually selling and he broke it down on the show In three distinct parts.

37:58I'm intrigued when you look at the IPOs there and the great outcomes they've gone on to be Do you sell all when they IPO and what's your process for Liquidating and how to distribute effectively? Yeah, I have the channel whenever LLP's tumbling amptus who's the CIO of weather gauge and I remember around Uber coupon, some of the situations where we had shares to distribute, speaking to Termin saying, what should we do? And Term said, whatever you do, you're gonna be wrong. And of course, the answer to that is, you sell prematurely and you didn't capture the upside. You don't sell and think tanks and you didn't preserve value.

38:34And frankly, it gets more complicated than that. Some investors wanna give the shares to their foundations and they could pissed off with you for caching out and giving them cash instead of shares. Some investors say to you, LP say, like, I don't know what to do with that chair. Like, I've never heard of the trade desk. Why didn't you make the decision for me? The answer there typically has been with big distributions, large positions. So fun movers or it's half the fund we distribute. And we say it's up to you with smaller positions when it IPO. So desktop metal, for instance, I got to the point where it was like, I know, worth $10 million.

39:08We sold and we take the cash and we distribute the cash. So I would say quantum or size versus the fun size is pretty much how we decide around that. Now, what our LPs did with their stake, so Trades 25x, Uber 150 billion. I don't even remember what the IPO price was. But Harry, that is, if I look back, I go like, never sell a single thing. If you could and people have to live and people have various desires, but if you could, never sell a share. And I know we've gone through the app and the down cycle, but great companies, companies with real modes, right? Like you want to be in those companies forever.

39:48That's when we get into Buffetland, right? And like you're not good at that. Do you agree with that? Do you agree with Sequoia's Evergreen Fund structure? Well, I think the timing was problematic, right? Clearly. But I think the theory that they had, I mean, pressed with them that they thought about that and they executed on it. I think the timing was unfortunate. I think only they could execute on it, to be honest. Yeah. Yeah. And then the company still have to be extraordinary. Right? So the company is in there and you could argue that they're head -dose. So I think the strategy there was actually sound.

40:19So we were chatting before and when we spoke you mentioned leech. And I thought it was a great acronym. What is leech, David? Let's start there. Oh, Harry, this is a subject I can keep you here all day on. But leech is lethargic economic extractor causing harm. These are these legacy companies. A great example of them is the PBMs, the pharmacy benefit managers. Companies that were very innovative 40 years ago, so a PBM connects the pharmacy to the insurer. 40 years ago or 30 years ago, they were great companies, right? And the insurance codes and how much you should pay out for your meds great.

40:56And then you have the whole internet and you've still got hundreds of billions of market cap, hundreds of billions adding no value. And the problem is that these incumbents use every trick in the book. Capitalism's so beautifully set up for them. So they use lobbying, they use lawyers, they use PR to say that the challengers are illegal. That's like job number one. I have had this time and time again. And in one way I go, it's a badge of glory, right? Like to actually like rouse a leech, like unbelievable. You're doing, you know, because the incumbent is now pissed off or worried about you. It's a badge of glory, but I think going through that what it takes to take on these leeches is tremendously underestimated.

41:38I remember at you T .J. at Pillpack talking to me about rousing the leeches That being a very difficult moment here. I'll tell you C. Geek. I actually gave I gave testimony to a panel of lawyers for the Department of Justice Rustus Sousa is the co -founder of C. Geek. He says to me come on a sales visit with him So I got a TD garden in Boston, which is like Madison Square Garden. We meet with the manager. She's awesome. She says, we turf ticket masks in a heartbeat and go with Seed Geek. Like we love your ticketing policy. We love the open thing. We can't give up ticket masks. You go like, I look at her, go, but hold on.

42:13You're like, you're like, there's no other venue like you in Boston. Like this is this, you know, covered arena. It's beautiful. It's where all the basket ball and ice hockey takes place. Like, well, you know, when you two come to town, who, where else are they going? Right? She goes, no, no, no, no, it's not that. It's like, live nation straight out said to us, you two will come to Boston. You'll have one night in Boston instead of three nights. I make like a million or two million dollars net profit a night. I literally gave testimony to the Department of Justice telling them exactly what I've just told you.

42:41And what you've got is you've got, you take vertical after vertical. So live nation, tick and mass, that merger should never have been allowed. But once it's allowed, we will occupy and monopolize that position all day long. Harry, we've got it right now. I had in my business in terms of taking on the legacy TELCOs in my startup like impossible and we can talk about some of the strategy around that. Is that ever a business you want to be involved in though? When you are fighting against these monopolistic players with regulatory power, with lobbying power, with capital modes to the extreme, I mean I've met so many ticket companies.

43:13I remember DICE most recently, I don't know if you know them in London, I'm just like how no, live nation, I'm not being against you, taking a master's knowledge on. You see it in travel the whole time. Am I really going to go against booking, expedient, trip advice, a Travago? Fuck no. Yeah. Yeah. We've seen this again in Suna. So Suna is a fun for a company. The record, the recording industry has just gone wild again, Suna. And often it's exact same playbook, but I think this is a place where VCs can add a ton of value is it's the same playbook. So they're lobbying their ass. The recording industry like first says, you're illegal.

43:47Like what you're doing is illegal. And open AI and lots of people have that same legal challenge, although it's slightly different. So the open AI challenge is on the output, right? The LLM, soon know the challenge is on the input. And soon know is going back and saying, we're training on the open internet. That's like Harry learning to play the piano and listening to the Rolling Stones. Is that okay? But the first thing is legal and you go, what's this actually about? And sometimes the answer is, I don't want you in business. I do not want you in the sector and I'm going to use all my heft. and then sometimes it's about like, I want my pound of flesh.

44:18But I do think this is an area with VCs, but any stage VCs can add a lot of value. So if you go look, this is going to happen to you. Here are, this is the way the game's played. Here are the lobbyists, here are the lawyers, here are the PR consultants, and here's how you're going to have to use your money. I don't know, it's like war, air, land, sea, and that's how you win. So you take TJ speaking to Mikey Schoenman at Tsuno, going, this is the playbook. This is the only way you know you resolve this do these companies inherently need to have more cash than they do They do they do by the you can't do you can have all the cash you want you're gonna all the strategies you want The first thing you need is customers that absolutely love and adore you if you don't have customers that love you Right like what are you doing this whole thing for so if you don't have actual and I would say this is Lulpaq sooner like every one of those companies had and customers, their revenues were increasing, because, and that's why they're a pan in the ass to the incumbents, is the incumbents go, oh my god, like, customers are actually going there, what's this thing about?

45:19And usually they don't have their shit together, right? So the incumbent is like playing for time or just like going, like, I want this to happen when I want this to happen, I don't want this to happen to me. So these companies not always lose. And I know PillPant returned the fund, and I love T .J. and so I hope I didn't upset him with this, but I mean, the PBMs are still the PBMs. and yeah, the appek is still appek and there's still work. Booking is still booking, live nation is still live nation. Oh man, Harry, there's no fun in entrepreneurship if you believe that. But is it not true? You know, the income...

45:53The only one that I can say disproves it is Spotify. And actually, you could say really what is Spotify, it's just another distribution mechanism. In some ways, that's just another way of distributing music. The recording industry that publishers, the owners didn't, you know, they didn't love when CDs disrupted LPs or when tapes, Papna CDs were. And in a way, like all Spotify, it's a Herculean outcome. But if you look at like how much of their revenue the record labels actually take, soon knows something very, very different. This is where AI is fascinating and really interesting. It like allows Harry, it's basically it's the breadth of your creativity.

46:30If you're creative, I will give you like the the most professional tools that like the best DJ in the world has, you've got that on your phone now. This is really, really problematic. Now, is the recording industry going away? Is Spotify going? None of them are going away. In fact, in some way, the biggest threat is if Spotify does this, with their incredible distribution. You've really got an interesting competition on your head. But then Cummins don't go away, but their share of the market can change dramatically. You mentioned sooner that obviously, an incredible business at the forefront of AI as well.

47:04AI is a new capital profile. Do you, you're a big, ardent believer in capital efficiency and kind of small rounds and being pragmatic around that as am I? Do you change your stance around that in a world of AI today? You know our view is kind of teams versus themes. And even in AI, like the teams have to get some kind of product market fit, some before. I think that can still be done reasonably capital efficiently. I think after that, if you look at the capital required to scale and to distribute, you look at like Josh Kushner's 1 billion at 100 billion open AI and I go, would I take that bet or not?

47:42All things being equal, I probably would take that bet. If you said to me, you have to, are you forer against? I would say, is Josh in the winner there going to make 2x and maybe much more than that? But bet against the 2x, I wouldn't bet against the 2x. I think his LP's will make 2x on that. But at some point to play in that, that's a whole different world. If you want to play in the hyperscaler game, you're going to need ridiculous amounts of capital. And by the way, we're seeing like what's a TLM, like tiny language models, which run on the mobile phone. Basically, it makes things like scanning or, you know, translation very realistic and on your phone, even when you're not connected to the internet.

48:22You need capital for that as well, because the programming overhead of that, the number of engineers you need to create something tiny is huge with that in mind. How do you think about navigating AI or seed round stake? All the AC rounds I see stay are just crazy competitive and crazy priced. We're off -piste, we're non -consensus, we're contrarian. So when I see those rounds, if I see a round at 5 on 20, that's in our hitting range. When I see those rounds at like 25 on 100, pretty much we're pretty much out. Again, team vs. theme. So there are rare instances where we see someone who's just like, you cannot ignore you wake up in the morning, you go, my god, like, how can I not be involved?

49:02But for the most part, 99 % of the time we're not involved. But you just can't make money in a seed fund, those numbers. I don't see how you can make money. It becomes open AI. I'll tell you, I was one of the first to meet Mr. All. Mr. All? Yeah, of course. And it was the first round was it like 250, I think. And I said, there's no way. Did you write the check? No. And I said, there's no way that I as a seed manager can invest in 250. What it goes to five billion and with dilution, which there will be a lot because I'm going to get what? But what if it's a 50 billion company? Yeah. Overall, I admire discipline.

49:40I think rearview mirror on this, you can't build a fund on this. Rearview mirror, you can think about that one that you missed. And there are one or two in a generation. There are these generational companies, or maybe there is one a year. And if you're in that company, awesome. But can you build a fund strategy? I don't think you can. It's not a seed. But you can break the rules. Well, if you break the rules and you're right, you've done unbelievably well. By the way, again, if you broke the rules and it was a 10 post and you broke the rules and was like, you know, 250 million posts, like the return to you and your fund is infinitely different.

50:14So I think you break the rules and you get right on a 250 million post and you get a 10x. That's why I go Josh on a billion. If he makes 2x there and you go like that is the company. That is the company. Would you bet against open AI right now? No way. So it depends on the customer base for open AI. If they distribute well and more and more people say, look, chat GPT is on my phone download that start using that. Like, you know, when my wife and my kids start to use it and like go, oh my god, I'm going here before Google. and not sure that Microsoft can think of it only as their play thing. If people are leaving OpenAI and OpenAI is not scaling and not creating more and more revenue, you may be right.

50:53But if OpenAI continues to grow the way it is, I don't know that Microsoft can ignore them. I think in some ways Microsoft are going to have to say, this is terrible, like because we wish to go under 100 % of it. But this is our play. And you know, who knows? Like the next thing could be a merger between OpenAI and Microsoft. I don't know that they want that. I think there's a lot of regulatory heat around this that you may kind of do well to avoid at the very beginning. I've been insanely impressed by the place to have to say. I don't know if you've used the capacity of the product. Oh my god, it's a phenomenal product.

51:23I start now. So I have a range of tools. But if you say to me, where do you start? I start in ChetGPT and I'm going to browser. That's where I start. Do you think AI will create a generation of new unbelievable companies with huge market caps? or do you think it will consolidate power into existing huge market caps? I think there's short -term and long -term. So I think in short -term we're gonna be, you know, underwhelmed right now. I think if you look at like the amount of capex that's being spent and you look at the actual earnings that will be generated in the short -term, there's just no way it makes sense.

51:53David Connors, of course, the $600 billion AI question, which is exactly that. And I think by the way, all the way through the ecosystem, so it's not just the hyperscalers, right? It's like down to and David said it well, like down to the data centers, down to the steel, down to the chips. I think in the short term, it's going to disappoint. I think in the long term, Harry, every one of these waves, by the way, it reminds me of like self -driving cars. I remember taking a bet with Eric, and he said self -driving cars in five years, and I said to him, the last 5 % is very difficult. And like, we're getting to self -driving cars now.

52:25So it takes forever, but it is where suddenly suddenly, and then boom. Suddenly weimos there. And now it's like, weimo, if you get into a weimo in California, like your mind is blown. So I think to discount AI in the next 10 years, man, you've got to be crazy. Like I think it's going to have profound, profound changes. The difficulty is it's always Hollywood. There'll be one in a thousand companies, it'll be off the charts and there'll be like one in a hundred that's amazing and that will launch so much capital being involved in that. Like we're too disciplined to be involved in like figuring out which is the one in a hundred.

53:00I remembered this with Eric and this is, you know, just like the height of humility. An LP at one of our annual dinners, like Leanne's conspiratorially over the table and says to Eric, how did you know? Talk about Uber, going like, how did you know? I literally see this in my mind's eye. An Eric looks straight in the eye and goes, I didn't know. The company before, I just so easy in that moment to retrofit like how smart I, and he looked, he said like, I had no clue. He said the company before was just as interesting in the company after, he said like, I had the same high hopes. And I think we're not smart enough to figure out the one.

53:34You got to be around and you got a hoist of flag and say like, I'm interested in these great teams. I don't know. We don't know how to do this. What I'm impressed by with always with you is your humility. I mean, I don't know. Yeah, dude, but like not many have the number of hits that you do. You can say I don't know when it's the one out of 50 that's ahead. But when you have the trade desk, coupang, air table, Uber, I mean, let's go on and on. Huge credit to Eric. You could see, well, the data series, you could do, you have a higher probability of knowing than anyone else. You're reminding me of Gain of Eric, right?

54:07Where Eric has those lens, it's so simple. We look at a company, we go, can we 10x that? Can we 10x? And if we can't 10x, then we shouldn't invest. And I think that is alignment with the entrepreneur. That is so much flows from that. Like the economics, the size of the deal, the size of the valuation. if we can't, with high conviction 10x, we shouldn't invest. That's how we create the alignment. That is Eric's rule. A lot of entrepreneurs would say, for a scene investor to think that, that's a low bar. You need to think bigger. How would you respond to that? Small fund, you can do that. Small fund, four companies are 10x, we return the fund.

54:45Do you know what I mean? Easily. Do you know what I respond as well? Go and read Bassamers' mamos, because every memo for big companies, whether it's Snap or whether it's ProCore or whether it's Shopify, by every great company, you underestimate the size of your winners. And so by thinking that, actually, you do not lose the amazing Olo, which will do great returns, the amazing Pill Pack, because you needed the $20 billion company. I just think it's insanity. Like I think when I think you market those winners, and again, it's great PR photo, it's great to like attract the investors in the next fund, but I think it's insanity to go, it's like they're huge.

55:23People don't even use the word unicorn anymore. That huge company or or best. I think it's insane by the way I also think it's like boring It doesn't take you in a whole range of like fascinating directions where at the beginning you go These guys are crazy like I am they but could this be a tenix? Yeah, it could be a tenix I think that just provides this much easier on ramp into these very interesting situations You think about downside protection when you come into companies It's just in terms of listen that really smart operators in payments bad day, striped by them. It's the one thing I don't think about much.

55:56But I think it's the most unfair feature of capitalism, Harry. The most you can lose is all your money. The most you can make is 3 ,000X, unlimited. If you just look at that, it is such an unfair feature of capitalism. And my LPs maybe go, I don't want to lose money for anyone. But I sometimes think exactly the opposite. If we're not losing, are we taking enough risk? I listened, I had Chaudu on from Indy the other day and I asked him, what's your biggest loss and what did you learn? He actually went, I'm really lost to deal. Now, I pushed back and I said, have you taken him off risk then? I mean, to be fair on him, he's got data dog and whiz.

56:36Like, yes, he's going. Yeah, unbelievable. But my question to you is, what's your loss ratio? I don't even know what it is. Now, we have definitely lost companies. And we've lost, you know, there's good losses in this battle. losses, the bad losses were where you look back and you go, my judgment wasn't good. When it's off, why is it off? So if I look back and I go, I love the what? I never really love the who. I've really learnt this the hard way. It's, Coppam and Call them are they like red button or green button entrepreneurs? They call it like 7pm just before you're having dinner with your family.

57:10Do you take the call? Well if it's you and I go like, I love this guy, I'm taking the call and I'll say like I'll call you back after dinner. But if it's red button, oh, you made a mistake. I look at that and I go, don't want to have lunch or dinner with that entrepreneur. That's a big mistake for me. When I look at it and I go, I fell in love with the what? Like I fell in love with the what, but I really didn't love the entrepreneur at the beginning. And I wasn't, you know, the chemistry wasn't there. That's a mistake. When I look at it and I go, look, that was just such an extraordinary entrepreneur.

57:37That person was so compassionate, I was so energized by that person. And you know, the context was wrong. We were too early. Like we gave it our best shot, but the income was just killed us. And never look back at that and go, that was wrong. I look back and there go, like that comes, you chop a lot of wood, you're gonna get splinters. I love that. You absolutely are. You know, there was one great piece of advice that I was once given by a guest who will remain nameless because he's very very confidential. I'll tell you afterwards. But he said, Hi, if you're ever willing to take less in a deal, don't do it.

58:08So if you have 1 .25 allocation and you're like, Oh, I'm fine to take one, don't do it. Do you agree with that? I think it's a great test. I'm very impressed. Sometimes if you love the deal and there's heat for the right reasons to take a smaller amount is doable. But I think the problem with that comment is it doesn't, it ignores the context and the context matters. So in a vacuum, that's a fine comment and I agree with it. But in the context of there are lots of other people interested, including some collaborators, you may go actually want them in this deal with me. And by that, that is under pressure.

58:45when people have got funds that are too big and the deals and there's less collaboration. But I think there really are people who you want alongside you because they're smarter and more experienced than you. If you're having to throttle down a little bit for that, I have no problem with that. Do you think heat correlates to deal quality? No, not at all. Yeah, this is my, I look back at the fun article for MCC, the hottest deals the worst, the 5125s that were the hottest, the worst. In fact, in an ideal situation when there's insane heat and something that we've got earlier. That's a great moment to take secondary if you can.

59:18Sometimes you can't. But if I speak to teams about this all day long, so you've got a billion dollar valuation and you're doing 50 million or 40 million revenue, forget you're losing money. This is an awesome time for you to take some money off the table. And in certain situations, we've had the founders say to ask, look, there's a little left over because there's such heat here. You know, there's 20 million to go between. You want to take some money off. And we have been able to take a third of, but do we get that right all the time? Well the answer was, you only know that in the rear view mirror.

59:48I won't mention the name of the company, we did take a third off the table, we were right over there, but we've got it wrong as well. We took secondary in some of our biggest names, we shouldn't have sold a share. Which one do you most regret selling a share? Well, it's Tradesca, I regret every single share I sold. Uber, I regret every single share I sold. Hindsight is just the most precise science. These are great moat companies. Oh, why, why, why, why would you bet against those? You mentioned the secondaries. We've had founders demonized over the last years for taking secondaries, especially as the tide has turned.

1:00:16How do you advise founders on taking secondaries, right amount to take, when to take them? How do you think about that? My rule of thumb is, you know, there's a hot big deal going down. Again, this feels anachronistic because this was happening on steroids three, four years ago. I'm seeing less of it. But if you take less than 10 % or less off the table, nobody's going to really mind too much. If things go south later on, then LPs look at it and investors look at and go like, I wish Harry didn't take five or ten million dollars off the table. I wish, I wish, I wish that. But I don't mind if Harry took a million or two million.

1:00:48By the way, I always say the first million dollars, like when the first million dollars makes it's, it's, it's fine rates. It makes all the difference. It's partially selfish. You know, it sounds like I'm so generous in saying, take as much money as you want, but it's, it's actually very self -serving as well. If that founder is going home and worrying about the mortgage and under pressure from their wife or husband or whatever it is or partner, we alleviate that pressure and giving them secondary. And encourage them to take secondary. So I'd say it's self -serving for the investors as well. Next thing you've taken some secondary, the mortgage or whatever the issue is.

1:01:21And of course if you're like in your early 20s and you don't have these problems, that the context matters. But I am pissed off. And I'm pissed off with growth investors who was shoveling cash down founders' throats in the good times. And now going, I can't believe all these founders that took all that money off the table. You fucking shoveled $30 million down their throats. And quite rightly, they said, fine. Yeah. We had this. The biggest sin of the lost era has been the huge amounts of capital. These like boat loads of capital. I'm going to meet later with Sam, your Sam Franklin from Otter, great founder, lovely business.

1:01:58And I remember, you know, the other investors were talking about 10 on 40, right? Like one call to John Attiger, like, 2018, no problem. And Sam at the moment thought I was like the superstar investor of all times. He was like a seed investor across the, you know, biggest name investors involved there. And like, like in a second did that. In retrospect, what a sin. What a sin. What if I used to do that deal? What a sin even for media, like, and I was caught up in the moment. But so I, he called me on that deal. Yeah. And I told him, even though I lost the seed in that company to local globe. Yeah, we co -led the seed with local globe.

1:02:34Fuck it's... Saul showed it to me and said, we need someone across the earth. And it moving swiftly on. But I remember I said, don't do it. If I were weather investors. Yeah, oh man. Those guys were just like a casino, right? Like it was insane. John was doing a kid you not. We did a 20 on 80, two weeks, We did one the one week and we did one another week and Otto was one of them. But in retrospect, you go, how do those founders know what to do with that money? And they have that money and they're going, no one would have like expanded in the US if you didn't have that money. But you go in your open office in the US and you go, before your model's working beautifully in the UK, you're trying it over there.

1:03:14So the Sun, like the last era, like the boat loads of capital, that's the Sun of the era. But I don't actually think it's changing that much. I think the haves and have not. So I think if you have AI, right, like it's changing. I think again, if you're a vertical SaaS company doing $50 million, right? The multiples or the listed multiples are constraining you. You're not getting a 20X multiple, dude, because that listed company that I own shares in is at 6X, 7X, that's the multiple. I see this is my opportunity, though, because you're absolutely right. But this means that everyone's kind of moving out of vertical SaaS thinking that it's not attractive and the fascinating thing there is, like it's like, it goes back to the end reason, you know, like soft, and reason said software is eating the world.

1:03:58Like I have this, like, the haves and the have -nots around data. And you look at some of these vertical SaaS companies, or horizontal SaaS companies, the truckloads of data they have, it's theirs to lose. So Mark Banny of Salesforce, you write that off at your peril, because the amount of data they have, they throw in these AI tools, they do their own stuff, right? Their opportunity is enormous. And I've seen this in some of our vertical SaaS plays, Like, if we give the customers in rich data, if we don't enrich the data, like, we're out of business. But we enrich the data we have, and you look back, you're like, whose opportunity actually is this in terms of AI?

1:04:33If you've got data and you drop the ball, like, you know, only blame yourself. It's not, I totally agree with you. I think the subsequent question, though, for me is, does AI mean you can increase the price you charge per seat or just maintain your position and have denigrated margins? It's a great question. because I had the CPI of Canva on the show and he said, oh, we're doing all these amazing things with AI. And I'm like, you're fantastic, but he mentioned the margin, denigration that happens with every query. And then they announced a 300 % price increase. It's an amazing tool. I'm sure people will pay for it great, but will we see prices increase or will we see margins?

1:05:11I think short term defensive. Short term defensive. If you enrich that and you're the one to do it, and you retain your customers, and because of the enrichment, you increase your revenues and you increase your customer base. Look at the great companies, Tesla, I don't know, look at Netscape, right? At some point, freemium. It's like freemium on steroids. I think that right players defensive to start, and then once you retain those customers and you've enriched the data, I think there's a lot you can do. So you don't agree to say that David Freedberg's all the dallians who say that AI means that companies will be able to build their own vertical solutions tailored to their specific needs and actually we'll see the end of verticalsass in that line.

1:05:51I don't agree with that. I think some of the tools are actually very commoditized. I think that the horizontal, or data owners will be able to access the underlying tools reasonably cheaply at some point. You may disagree with that, but I think if you look at some of the open source software around this, it's going to become more and more commoditized than underlying tools. So you could go and say, well, why can't every single company do that? I don't think you can, but I think they're going to be software providers that enrich their toolset that are going to do unbelievably well. I think we drastically overestimate the technology sophistication of these companies to be able to build with AI that own vertical solutions.

1:06:29Are you kidding me? They struggle to onboard Slack. Yeah. You remind me a little bit of when I started RISP with my co -founders and we went to like like the biggest banks and we offered them internet service and hosting and all sorts of like e -commerce options. And then we went to like the national kind of railway owner and they said, look, I've got a network, I own a network, I've got fiber on every single railway. I own a network that like just dwarfs you, right? I can do all of this. Like what I need you for and I remember like, we was like, okay, like walk out right six months later, they've done nothing, you know, you're later, the down two years later, the answer is there'll be the short term thing where again, everybody goes like, I don't need you.

1:07:07Like, is there a business in terms of smart software solutions? And yeah, that's all over the play store. There's one final thing I want to discuss, which is boards. I spoke to so many friends of ours, founders that you work with. You're a phenomenal board member. I actually sat with you on a board and you're again fantastic. To kind. What's your biggest advice to me on how to be a great board member? Well, I think you have to have that economic alignment to start off with. So I don't think you should ever take a board seat where you own two smaller percentage or the size of that potential outcome vis -a -vis your fund is too small.

1:07:42So I really think you have to have the economic alignment because it means every time you sit down it's like us. For a founder to know what is economic alignment, what would that be just broad range? Look, if you kick off and you own on a board less than 15 % of that company, I think it's problematic. Certainly in terms of our fund structure, So the capital and the cash is infinite in a way, or has been in this era. Your time is not infinite. And at some point you're gonna think very seriously about your time. To be patient, you need that economic alignment with the founder. So if the founder owns 95 % and you own 5%, problematic, every time you sit down, you go like, I'm working for this guy, de facto.

1:08:23If there is more alignment in terms of ownership, then I think it works better. Harry, if things are going like, ballistically than it doesn't matter. So that always breaks the rules. I'm talking about 99 % of the time. You've got to sit down and go, it's our company. We're in this together. Because last non -dilution, I think people forget the impacts of dilution to stay too often. We don't think about dilution much. We really don't. Our MO has been, we dilute alongside the founder. As a seed stage fund, we're getting involved at the beginning and it's been a strategy and we don't think about dilution.

1:08:58We think about time, and we love the alignment of coming in very early and hopefully being economically aligned with the founder. And then it's the exact same strategy, it's exact same thinking as well as dilute alongside the founder. By the way, I can't afford in my fund. If I've done my job right, and you are raising your next set of capital of three X or four X, I just can't afford to actually maintain my percentage ownership. And there's also the times when the opportunity cost of capital is so real that to continue to sustain that is just not a worthwhile position. So I completely get you that Vinal Kosa says for you, interestingly that 90 % of VCs to track value.

1:09:37Do you agree? In a career, I've been through one bankruptcy, one bankruptcy. So in a career in hundreds of investments, I've had one bankruptcy. And Micah Rosenblum, my partner's father, Lu Rosenblum, was one of the best bankers. out of Chicago, one of the best bankrupt -seed lawyers. And I remember thinking, oh my God, I do not know what is hit me here. This is like a freight train. There was an enormous fraud in the company. The CFO committed suicide. The CEO is still in jail. I mean, it's like huge story, right? Like they were literally fraudulently putting KPMG on fraudulent financials. I remember that moment when Micah said to me, Loo is going to take you under his wing.

1:10:18I'd been paid out a a couple of million dollars, the first thing Lucie had to me is, you're going to give back every last cent. You're going to be the first person who gives back all the money and all the other investors are going to hate you for it, but that's the first thing you're going to do. So I'd taken secondary, it was 4xR investment on the secondary, gave every cent back. But here's the thing, the degree to which I felt taken care of by this guy who was an expert. I think sometimes, and I think he felt great that like here was this helpless capitalist, just like hit by a freight train in terms of this bankruptcy.

1:10:48If we can do that once in a while, the joy of that, right? Sometimes this is about financial returns and it sounds like completely ridiculous to say it's not. But sometimes the gift of that, right? And the chemistry that that unlocks, you know, we'll do every company together after that. You mentioned the word fraud. I think there are so many more frauds in portfolios that people are not talking about. Do you think there are a lot more frauds than no one is saying? I think they could come out. Harry, I think the era gave rise to that, unfortunately. There's so many brands that are around this.

1:11:20Is there anything you feel we haven't discussed about the world of venture that we should? I was thinking about this. I actually just wrote down Matchmaker here. Like, the small fund versus the big fund, and the concept of the big fund, the lifetime investor fund really has no incentive to matchmake for you. They have the cent of... What do you mean by this? Okay, so when you're a small fund and you're not going to invest just round off the round, right? Like, whole mo is make introductions. All day long, if you think of like, a lot of what I'm doing is making introductions to other fans, I'm like a glorified matchmaker.

1:11:51So some of the thought over there was, what's the difference between, and maybe it's stage specific funding, but like, what I get from you, what I get from Sequoia, well, Sequoia will never, ever send you, will never match make for you. Sequoia will, if you take your check from, and recent Sequoia, Axel, you name them. They will never, they have no incentive to match make. They have no incentive to take you to another fund. At some point, because at every stage, they either want their pro -rata and they want their pro, this is the difference between kind of totally financial investors. And I'd say a lot of the ecosystem has become that.

1:12:27It's like, have my pro -rata, let me wait for you and go to the market, whatever. And if you're hot, I'll invest at the market clearing price. And if you're not hot, I'll get a deal. And otherwise I'll go, I'll just won't invest at all or for you. right? So it's basically like call option time all day long. Where is if you look at us? If you look at seed funds, right? A whole incentive is to get you funded. Harry, I promise you, I imagine a lot of your time is like, oh, think about that fun. Think about that fun. Think about that partner. To the point that over 15 years, we've operationalized this.

1:12:58Like our software, I don't care if you use Monday, airtable, we use airtable, but our airtable and the number of people in our organization who just like full time dedicated to this to like finding you not to the right partner, right? Or we do. Like I'm like a glorified matchmaking on steroids. That's all I do. But advice to founders, you need to have a seed partner who knows the specific partner at the firm. You need it because it falls through the cracks and you go to die there. And you need Alex Towsie at light speed. So you need the science and you need the art. You need the science of going, I'll take you to the right partner because of course, Hit rate with the wrong partners and happens all day long is like Harry's busy.

1:13:37You're on a deal You're not that particularly interested in that vertical or whatever done finished But there's the art as well, right? And you know ideally this is sales, right? This is testimonial sales I'm saying Harry is awesome. Harry is awesome. Like it's not Harry going. Oh, I'm awesome, right? It's me saying Harry's awesome and by the way I have to believe that for that to be really authentic So that's why like our testimonial sales without better companies with our companies that are performing are better than when we're trying to sell a company that's not performing. So it comes down to performance.

1:14:09I do think there's also incentives that founders don't see, which is especially on structuring rounds. People will bring in people who are maybe not the best fit for the company, but they owe them for a deal that was done before, or they want to curry favors with people. I see there's a lot where I'm like, hey, hey, the head of growth at Revolute is a better angel than this random person, but the founder is being pulled along by the VC who owes them a favor for a deal that they sent them last time, and I don't think founders see a lot of that. It depends on the context again. It depends on how hot the deal is.

1:14:44I think you're describing a hot deal in a tougher time, like Helitosis is better than No Breath at all. So, you know, like if you're doing your body a favor, and that person's putting five million dollars into my I deal and I have struggled to fundraise, like, bring it on. I totally agree with you. I've never heard that saying before. TTm off -icizing. We do. I've seen a bunch of times where funders will look at TAM and they'll walk away from a deal and they'll say because the TAM wasn't big enough. One of my favorite examples of this is media radar. I was in it with Bain Capital, pre -founder collective.

1:15:20It's one of the biggest vertical SaaS plays, if not the biggest in the world in media now. How much is it worth? It's worth billions today. It's another company I wish I'd stayed in, Todd Kreiselman, unbelievable business. So we showed it to, I don't know, Bane Flybridge Bessamer. I remember this like it was yesterday. The Bessamer team did all the market sizing. They went newspapers and magazines that's dying. Right? The tam... Tam shit. Couldn't really argue with them. Like, just kept going. I had looked at newspapers and magazines as the angel invested and gone, you know? So that's a couple of hundred million dollars, not billions of dollars.

1:15:56Okay, next thing media radar goes into Facebook, Google, everything online needs them. Next thing they're going to Netflix, Apple, Amazon, everything that is being screen needs them. And the tam just was like infinite, right? So I've seen the mistake made where you under, you really undersize the tam. It sounds very seductive and logical in the moment. But like do I think of tam, tam matters. But when you're starting out, I don't think it does matter. Yeah, actually I really don't I think the difference in a $1 billion dollar founder and a $10 billion dollar founder or sorry $1 billion dollar company and $10 billion dollar company is a truly great founder who can do a great secondite I agree and honestly if we're coming in at sub 20 Yeah And especially when you've got the heuristic of a 10x who gives a shit?

1:16:40I'm really so great founders find markets. I agree with that I think all things being equal in the rear view mirror you look at like the trade -s versus Olo And you go the trade -s because like it's this infinite term right? you could literally be Google, Facebook, and Trade Desk. And then you look at Ola and you go, okay, vertical SaaS restaurants is that tam limited. Probably all things being equal, but there you go. Totally, but both made you a lot of money. Yeah, you know, no race 600 million for 10 % dilution when you IPO'd. That's fine. He's a really good dude. Listen, I wouldn't do a quick fire with you.

1:17:12So I say a short statement, you give me your immediate thoughts. Yeah, I think. Yeah, maybe. What have you changed your mind on most in the last 12 months? I used to think that PE firms were like the enemy of the seed stage and I've changed my mind on that. We've got some PE firms in two vertical SaaS companies that I'm involved in. Their rigor, their financial discipline and the help they've given to those companies has been great for all for the entire cap table. So PE can be very, very valuable in portfolio companies. Mark Sustis said on the show that liquidity will be provided by PE in the next generation as the core.

1:17:47We agree. Totally seeing that. What investor would you most like to swap portfolios with? I find this easier to answer at the company level. So if I think of like applied AI, and I think of some of those companies, Microsan Bloom on Vacada comes to mind, that is applied AI to camera. Josh Wolf, who did Angerall out of Lux, that's like applied to drones. Again, if I look at Josh Krushner, a billion on a hundred billion, I wouldn't bet against that. So the myonsons company based. Bassballman, you sit on a board with and why then? Jake Saper from Emergence on Regal. There's been just an incredible augmentation.

1:18:23Just been a fantastic partner to have on the company. So Jake, a sourced Zoom for Emergence, deserves a lot of that credit. Reverse the truck on this portfolio company and every bit of hiring, every bit of advice, it's literally like he can't do enough for a company. A later stage, he chooses very carefully, he doesn't do that much and when he does, like through thick and thin the sky just gets involved. What's the best investment advice you've received? Patience. Just be patient. What do you know now that you wish you'd known when you started found a collector? It's a long, long journey and even post IPO hang on.

1:19:00When you think company has a real moat and is very different compete with, don't sell suit, don't sell too soon. What was your biggest loss and what did you learn from it? A biggest loss was probably the Pinterest. There have been so many. So what is my biggest loss? So I met Marty Adlin who was starting running Tide. He was a mechanical engineer, first individual in his family who had gone to college and just one of the most thoughtful guys in applied ocean that I've ever come across. Third generation lobster fisherman. And I was just very, very seduced by this I reversed the truck for Marty and what I think our ender estimated is translating a product vision into something that was truly commercial didn't happen.

1:19:46We lost all of our money on running tide. Biggest sin of the zup era, just too much money. Drove everything, too much capital. Stuffing capital down on entrepreneurs' throats. But ultimately one had to see others day and I thought it was incredible. The heaviest thing in life is not iron or gold, it's unmade decisions. What unmade decision ways you would most. Oh, love that. Such a good question. It is. It's a really unfair one to throw on you, but I really think about that a lot. Oh my God. I'm going to really have to give some thought to that. Unmade decision. I literally have got to think about that.

1:20:21It's a good question. Yeah, it's a great question. Like honestly, just one takeaway and think about I really thought about it. It's a great question. Yeah. The unmade decision. Honestly, I look back and I go, every great decision was never binary. It was always weighing up scales. And I think getting to conviction is confusing for people because they listen to this and they go, are you a binary about that? Like you knew unequivocally. And the truth was like the biggest decisions, it was 51%. So leaves South Africa and go back to live in Boston. take up the offer to start founder collective with Eric.

1:20:56Was that by binary no brainer? Well the seduction of wanting to be in business with Eric definitely was but everything I was leaving at home Burning bridges and like burning the boats is it's insanely difficult and I think that the older you get The tougher it is to take binary decisions and I think that the Good part of that for a founder is when we give a term sheet when I say I want to be on your board Man, it is hard thought through. I do not do that flippantly. And when I do do it, do I have every single question answered? No. It's sometimes emotion versus intellect. And at some point you've got to go, I'm going to run with your emotion here.

1:21:35And conversely, if you don't have that, I think about this as going up the mountain. Instantly, we have this incredible rapport. Like I just leave that meeting feeling like so energized. And then I go home and I sleep the night away. I come to the next morning, you're like, this will kill you, this will kill you, this will kill you. You'll never take them on, right? Like you're dead before you start. And like, I just talk myself, I drive to work, I talk myself out of it the whole way there. And then, by that afternoon, I'm going, oh man, but like Harry's amazing, right? Like he's unbelievable.

1:22:03And at some point, to ignore the emotional visceral responses also wrong. David, I want to finish with what question are you never asked that you should be asked more? What matters most? I come back to love and friendship and loyalty matters most. You know, I started this show to meet incredible ambassadors. I've got a good book. I've got a good book. I've got a good book for you. Oh, gosh. You've got to talk about that. What was the favorite book I read in this the moment? I mean, like, I'm obsessed. Okay. What's the favorite book? So, Harry, I'm reading The Path Between the Seas by David McCulloch.

1:22:35The book was written in 1974, won the National Book Prize in the US. And it had been recommended to me so many times. It is about the building of the Panama Canal between 1870 and 1914. Just to give you a sense of this, France spent 250 million and effectively went bankrupt. 20 ,000 people died, mainly from yellow fever and malaria. The Republic of Panama was like America doing the most colonial thing you could ever imagine. They basically took it and they paid the gave the Republic of Panama, which they effectively created $10 million, dollars and they bought the defunct business of the canal from the French for 40 million dollars.

1:23:14That was bigger than the aggregate amount that they paid for Cuba, Louisiana, and Alaska. This was like big, hairy, audacious on steroids. And a friend of mine recommended and said, you know, if you want to look at like moonshot stuff again and everything that was true in capitalism, then, is still the same. The lobbying, the politicians on the take, the media, the banks, You know, it puts like Elon like SpaceX and Tesla just puts that in like insane But this was like the moonshot of moonshots and a lot of the time like you look at Frederick Deliceps But your fun size is not size But we can get these things to fun moonshaws, but we can start these things We can get involved at the beginning of these things.

1:23:56Can you be raising 20 to start? Yeah, I mean, I have to like strong on my partners into like putting five million dollars into a company, but yeah, we can

1:24:06I'm like, I'm an Eric. Listen David, I love this. Harry, thank you so much. This has been so much fun. You know what? That was such a special one for me to do. David has been a supporter and friend for many years. And so it meant the world to me that we got to do that in person's day. If you'd like to watch the full episode you can find it on YouTube by searching for 20 VC. That's 2 -0 VC. But before we leave you today, this episode is presented by Brex. The financial stack founders can bank on. Brex knows that nearly 40 % of startups fail because they run out of cash, so they built a banking experience that takes every dollar further.

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1:26:02So if you're ready to get started, head to Squarespace .com for a free trial. And when you're ready to launch, go to Squarespace .com slash 20VC to save 10 % off your first purchase of a website or domain. And finally, before we dive into the show, I want to recommend a book, The Road to Reinvention, a New York Times bestseller on mastering change. No time to read? Listen to 20 VC now, then download the Blinkist app to fit key reads into your schedule. With Blinkist, you can grasp the core ideas of over 7 ,500 nonfiction books and podcasts in just 15 minutes, covering psychology, marketing, business and more.

1:26:39It's no surprise eight Blinkist users see themselves as self -optimizers and 65 % say it's essential for business and career growth. Speaking of business, Blinkis is a trusted L &D partner for industry leaders like Amazon Hyundai and KPMG UK, empowering over 32 million users since 2012 as a 20 VC listener. You can enjoy an exclusive 25 % discount on Blinkist, that's BLINKIST, just visit Blinkist .com slash 2 -0 VC to claim your discount and transform the way you learn. As always I so appreciate your support and stay tuned for an incredible episode coming on Wednesday with Zach Parrey, co -founder and CEO at PLAT.