20VC Newsletter - 12th January 2025
Here are the transcripts and top takeaways from 20VC episodes released this last week.
Monday’s episode with Mike Maples Jr, Founding Partner @ Floodgate:
Download the full transcript:
My 8 key takeaways:
How to do a 10x Fund
5% of our checks need to be 100x cash-on-cash on the first check.
10-15% need to be 20x.
Our business is hard but not complicated.
Two Rules of Investing
Two things:
You’ve got to get paid for the risk you take.
Always play offense with your money.
The Two Ways to Make Money at Seed
Entry pricing inefficiency.
Exit price inefficiency.
There is so much money that a lot of companies will get fully valued like they’re perfect for a very long time.
Seed funds need to capitalize on those moments.
The 4 Investments That Made 100x their money
Four investments:
Twitter: over 300x
Lyft: 205x
Applied Intuition: encroaching 100x
Twitch: 94x
The Biggest Problem with Large Seed Rounds
The purpose of a seed round is to test your insight with the minimum viable amount of time & capital.
Founders today raise $4M & do a bunch of stuff with no clear line of sight.
This hurts founders more than VCs.
Buffet Baseball Analogy
Investing is like a game with no called strikes.
You can let pitch over pitch go by & not swing.
You just need to wait for the right pitch then swing with all your might.
What the Follow On Market Tells You About An Investment
If firms like Benchmark, Sequoia & a16z want to invest aggressively, that is a strong signal.
They are picking from every seed investor & decided this is one of the best projects in the current private landscape.
You shouldn’t blindly follow them, but you should at least consider exercising your pro rata right.
The Big Problem Multi-Stage Funds Have
They have raised money based on 2020-2022 exits.
Those exits did not & will not come.
They will feel pressured to rationalize their fund sizes over time.
Wednesday’s episode with Dan Gill, CPO @ Carvana:
Download the full transcript:
My 7 key takeaways:
The Product Advice I Give More Than Any Other
If you can only change one thing & everything else stays the same, what would it be?
You have to understand the complex system and identify the true needle movers.
You can’t change everything all at once so focus your energy on the one thing that will create the most impact.
How Startups Can Show Defensibility
I often ask founders “How does your moat get wider & deeper the more you build?”
These answers should be sequenced; “X will lead to Y, then Y will lead to Z…”
You shouldn’t be doing them all at once.
How to Know if Your Idea Is Important: A Framework
Magnitude of Impact x Frequency of Occurrence.
A medium pain that happens once every 50 deliveries is more important than a horrendous one that happens every 50,000.
You can distill that into a unit economic framework.
The Art of the Pick
A lot of founders are in a hurry to start something that they’re not rational about what they pick.
They need to have a clear vision for how a feature is a wedge to something much bigger & indispensable.
Too many companies today are features not products.
Is Carvana Going After the Peer-to-Peer Car Sales Market?
Carvana should go into the peer-to-peer car market.
Peer-to-peer sales skip the quality control step; if people opt into that they will get a lower price.
If we make the transaction financeable ($100/mo vs. $10K upfront) there will be more buyers.
More buyers = higher price for sellers.
Will Carvana Start to Sell New Cars
We had to start with used cars because new cars were extremely regulated by franchise laws.
Moving into new cars means we can leverage our logistics network & customers get a broader selection to choose from.
It’s an exciting space to move into.
How to Get Any Job You Want
Reach out to an organization with a vision on how they can get better.
You should be so passionate about it you already have many ideas.
There is nothing more magical than being a founder & having someone tell you they love what you’re doing & want to be a part of it.
Friday’s episode with Mikey Shulman, Co-Founder @ Suno:
Download the full transcript:
My 6 key takeaways:
Why Paying for Specific Models Will Go Away
People will not care which model powered the product.
At some point there will be a last model released as a model.
Everything else will be product releases only.
Why Charging From Day 1 Makes for a Better Product
When everything is free, it is harder to identify which users found it valuable and which did not.
If we charge on day one, we can talk to users who subscribed before hitting the paywall or didn’t subscribe after hitting the paywall.
We would have had a worse product if we didn’t have that data.
Why Research Teams Do Not Scale
You cannot throw more bodies & get proportionately better results.
You will get sublinear returns.
Quality over quantity: all of our researchers need to be world-class if we are solving important problems for the future of music.
Why the Amount of Lawyers vs Engineers Tells You the Growth of a Country
There was a paper in the '80s that studied why some countries grow and some don’t.
They looked at the ratio of the number of engineers to lawyers in each country.
More engineers = more growth; more lawyers = less growth.
Is This the Future of Music
Artists will have their own models to create their songs.
They could even provide them to their superfans to make music.
It will be immensely engaging & way more valuable than having an AMA.
Why OpenAI Did a Disservice to Every AI Company
Everybody thinks an empty text box is the right interface for AI.
It works for ChatGPT but is unsuitable for basically everything else.
There should be far more intuitive ways to interact with AI in 6–12 months.
Let us know what your big takeaways from this week’s shows were in the comments below!
Thank you for reading, and don’t miss the great guests we have next week:
Shervin Pishevar, Investor @ Uber
Victor Riparbelli, Co-Founder & CEO @ Synthesia
Eran Zinman, Co-Founder & Co-CEO @ Monday
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