# David Tisch: Why No Manager Wants to Stay Small & Why Competing with Mega Platforms is a Losing Game

20VC with Harry Stebbings · 2026-10-31

<https://20vc.podhood.com/a8beb778-75b8-4529-a300-92f497133254>

David Tisch, founder of Box Group, argues today's frothy seed market is a standalone condition unlike 2021, and that $10–20M seed rounds are rational because outcome sizes have expanded ($10B companies are now plausible) and later rounds dilute founders at 3–8% instead of 12–20%. He calls concentrated managers' claimed 90% win rate 'total BS'—more like 20%—explains why Box Group invests without ownership requirements (checks from 1% to 10%), and says getting to deals late is his firm's biggest cause of losses. He declares the Lean Startup 'a total fake,' details how Cursor returned the fund multiple times, how Rogo was passed on by 39 of 40 Series A investors before Keith Rabois, Sequoia and Kleiner funded it, why pro rata rights are earned not contractual, why he won't sell positions early, and why venture is consolidating around 10 outlier firms, with Y Combinator the industry's only differentiated product.

## Questions this episode answers

### Why does David Tisch think concentrated seed funds overstate their win rates?

David Tisch says every concentrated manager claims to win 90% of the deals they want, which he calls total BS, estimating it's more like 20%. To get 30 companies at 10% ownership, he believes they offer the deal to 120 or even 150 companies, so the best companies don't always make it into the portfolio due to adverse selection.

[14:44](https://20vc.podhood.com/a8beb778-75b8-4529-a300-92f497133254?t=884000)

### Are pro rata rights actually worth anything, according to David Tisch?

David Tisch says the right to invest in subsequent rounds is earned, whether or not it's in the documents. Having it in documents mainly helps founders negotiate, since follow-on funds in the A and B will try to squash early investors, and fighting a founder over pro rata risks losing financially or reputationally.

[48:26](https://20vc.podhood.com/a8beb778-75b8-4529-a300-92f497133254?t=2906000)

### When should VCs take money off the table and sell positions early?

David Tisch says Box Group doesn't sell early because the best companies compound most at the end, going from $2 billion to $4 billion to $8 billion is easier than $0 to a billion. He distinguishes founders taking secondary, which can reduce stress and increase risk appetite, from VCs de-risking positions, which he thinks leaves money on the table.

[52:50](https://20vc.podhood.com/a8beb778-75b8-4529-a300-92f497133254?t=3170000)

### Why doesn't BoxGroup allow 'grenades' in investment committee discussions?

David Tisch explains that if you haven't spent time with the founders, you aren't allowed to be negative about a deal. Since anyone can name five reasons any early-stage company will fail, explaining failure is obvious and irrelevant; the job is to squint and see why something will work and say yes to the right things.

[1:06:48](https://20vc.podhood.com/a8beb778-75b8-4529-a300-92f497133254?t=4008000)

## Key moments

- **[0:00] Intro**
  - [0:00] "The Lean Startup was a total fake" — David Tisch's blunt cold-open takes on winning deals and grenades in IC
- **[1:27] Market conditions**
  - [1:29] David Tisch: today's frothy AI market is a standalone new condition, nothing like 2021
  - [3:19] David Tisch: the macro matters less than the micro — frothy markets still hide great companies worth backing
- **[5:59] Bigger rounds**
  - [6:43] David Tisch: $10–20M seed rounds are rational because outcomes hit $10B and later rounds dilute just 3–8% instead of 12–20%
  - [10:29] David Tisch: venture is pure power law, so he never competes head-to-head with the best VCs for 10–20% of an outlier
  - [14:44] David Tisch: concentrated managers claiming 90% win rates is "total BS" — it's 20%, and they offer deals to 150 companies to get 30
  - [16:29] David Tisch: "I think the Lean Startup was a total fake" — name one company that ran the playbook and worked
- **[17:17] Lean startup**
  - [19:33] David Tisch on tranched rounds: "I would like to invest at the lower tranche" — and how he remembers VCs who cut him out
- **[22:04] BoxGroup model**
  - [22:04] David Tisch's BoxGroup model: no ownership minimums, no boards, checks from 1% to 10% of a company
  - [23:56] Q: What's David Tisch's deal win rate? 70–90%, and the biggest reason he loses is getting to a deal too late
  - [26:07] David Tisch: lead-only seed funds are obsolete — if Sequoia wins the seed, Andreessen must rush into the next round
  - [29:11] David Tisch tells LPs the truth: pure-play sub-$100M seed in San Francisco is the worst segment to back today
- **[32:27] Cursor**
  - [32:29] Cursor returned BoxGroup's fund multiple times — "our Excel sheet broke" when David Tisch tried to update it
  - [33:31] David Tisch: company creation is faster than ever, but Clay took a bumpy four-year road and Baseten needed inference to become an outlier
- **[35:21] Founder quality**
  - [35:32] David Tisch: the best companies aren't obvious on day one — Harvard and MIT undergrads couldn't envision the world even two years out
  - [39:01] David Tisch: today's winning founders are more technical and smarter than ever — there's less room for mediocrity to succeed
  - [42:04] David Tisch: BoxGroup stopped funding consumer brands at seed because you get no LTV or CAC data pre-momentum
- **[44:00] Rogo**
  - [44:02] Rogo was passed on by 39 of 40 Series A leads — then Keith Rabois led the round and Sequoia and Kleiner followed
- **[48:24] Pro rata**
  - [48:26] David Tisch: pro rata rights are earned, not granted — but having them in the documents gives founders leverage over follow-on investors
  - [52:50] David Tisch on secondaries: "We don't sell early" — the best companies compound the most at the end, from $2B to $8B
- **[57:29] Consolidation**
  - [57:30] David Tisch predicts fewer VCs in five years and asks every new manager: "What's Fund 4 look like?"
- **[1:02:23] Picking winners**
  - [1:02:24] David Tisch grades himself on finding, picking and winning: "I just think we're mid constantly"
  - [1:05:59] "We don't allow grenades at early stage" — inside BoxGroup's no-vote, no-negativity investment committee
  - [1:08:17] David Tisch's LP picks: Y Combinator is the only differentiated product in venture, plus Benchmark, Thrive and Founders Fund
- **[1:09:40] Lightning round**
  - [1:09:47] David Tisch predicts venture consolidation: 20–30 competitive firms will remain, with only about 10 true outliers
  - [1:16:45] David Tisch: autonomous driving is a solved technology that would save hundreds of thousands of lives — it irritates him it isn't mandated

## Speakers

- **Harry Stebbings** (host)
- **David Tisch** (guest)

## Topics

Tech Market Trends

## Mentioned

Baseten (company), Benchmark (company), BoxGroup (company), Clay (company), Cursor (company), Harry's (company), Ramp (company), Rogo (company), Sequoia (company), Triumph (company), Y Combinator (company), Lean Startup (product)

## Transcript

### Intro

**David Tisch** [0:00]
I've never understood trying to compete head-to-head against who I would deem to be the best VCs in the world. Every concentrated manager will say that we win 90% of the deals we want to win, and I think that's total BS.

I think it's like 20%.

**Harry Stebbings** [0:14]
Over the years, me and David Tisch have done many shows, and I've always questioned his model: low ownership, very diverse portfolios. And you know what? I was wrong. David has absolutely crushed it. He's one of the best early-stage investors of our time.

This was a phenomenal discussion. I loved making this happen.

**David Tisch** [0:30]
I think the Lean Startup was a total fake. There's people, to meright now, and this happens in hot market conditions, that are playing a short game. I believe theright to invest in subsequent rounds is earned. I work for our LPs, and my customers are founders.

We don't allow grenades at early stage. You're not allowed to throw a grenade on someone else's deal.

**Harry Stebbings** [0:50]
Ready to go?

David, I'm so excited for this, dude. It's been 2 and a half years since you joined me. You very kindly reminded me of a debate that we had a couple of years ago, and we're going to get into that, but thank you so much for joining me first.

**David Tisch** [1:17]
Thanks for having me back. Nothing's happened in between the past 2 and a half years and now, so we can just sort of regurgitate all the old conversations.

**Harry Stebbings** [1:27]
Has our job completely changed, David?

### Market conditions

**David Tisch** [1:29]
In some ways, totally, and in other ways, not. I think, you know, I've been doing early-stage investing for 17 years now, which makes me old. And I think a lot of the times, people try to relate the current moment to a historical moment.

So, you know, is this like 2021? To me, no. It has nothing to do with '21. It's a totally separate moment. And this one's funky and interesting and maybe frothy, maybe insane, whatever it is, but it's a standalone new market condition that you have to figure out in today's world.

Because in '21, there were a bunch of other factors, macro-micro, that were creating that environment. And if you go back to, you know, '18 and '15 and 2010, each one of these moments are just different. And so I could argue our job has totally changed, and equally explain that our job is just to do whatever the current market conditions present.

And the actual job is, like, see, meet, get to know great founders, make a decision: should we invest or not, and beg them to take your money. And that's the funnel that we operate in.

**Harry Stebbings** [2:50]
In 2021, I think we could acknowledge it was just incredibly bubble-like. It was a good time to sell, it was a bad time to buy. There was no fundamental technology innovation. There was short-term behavioral change with COVID in different respects: communications, buying.

Everyone says, "Whoa, now it's starting to feel like 2021." Are you in that camp of the craziness is real, or are you in the camp of, "No, we are so early and there is so much room to run"?

**David Tisch** [3:19]
I don't think it's as simple as that. I think in each one of these moments, there are good companies and bad companies. And so as a VC generally, and especially as an early-stage VC, I think the macro is less impactful than the micro.

Is the company that I am fortunate enough to be an investor in the good one? Is it the great one? Is it the most important one? That transcends the macro. And the macro, to me, is like a portfolio analysis.

It's an industry analysis, but it doesn't come down to a specific company analysis. So do I think there are, you know, not-perfect companies raising a lot of money at big valuations? Yeah. But I don't know that that's ever not the case.

And I think you've seen it historically in our industry. There are incredibly public blow-ups of some of these companies that happen in catastrophically messy ways. It sometimes creates TV shows or movies or documentaries. And then there are companies that die quietly in the night.

But I think underlying all of these moments of frothiness are probably a handful to a lot of great companies that are building high-quality businesses, and they're doing it in, you know, a long-term-oriented way. Are they raising money quicker?

Are they raising money less dilutively? Are they, you know, doing it at big valuations? Absolutely. But I don't think that that is a, like, industry-wide harmful set of conditions. It's just, is this company a great company? Can this founder, can these founders navigate incredibly complex, changing environments almost in real time today to create an enormous amount of value that I think you are, to your point, in the early innings of a deployment of a horizontal new technology that will have tremendous impacts?

But like all other technologies, what you see is this initial wave of impact, initial set of reactions, some version of plateauing, more innovation, plateau, innovation, plateau. The difference this time is those, like, cycles are like 2 to 3 months.

It's the new model release. It's the new revenue growth of a vertical AI business. It's a huge M&A deal. All these moments create these mini-cycles that feel like they have sort of waves across the industry.

### Bigger rounds

**Harry Stebbings** [5:59]
We've seen seed rounds be $10 to $20M very consistently.

**David Tisch** [6:05]
Well, also $50 or $100 or $1 billion.

**Harry Stebbings** [6:08]
For sure. But I'm saying kind of if we don't take the real outliers, like $10 to $20, it's really been quite normalized as a round size for good seed companies with, you know, pedigreed founders. I get that our job is just to find them and, you know, beg them to take our money.

But does the business not really change in that respect? Suddenly, how do you think about sizing? You know, bluntly, there's nothing there, and you're having to write a large proportion of your fund as an entry check. How do you think about that with the massive explosion of round size?

**David Tisch** [6:43]
You can either come on a podcast and complain about it, or you can do the thing: make a decision, yes or no. If you're going to play the game that's in the market of deals, you don't get to change the competitive dynamics of a free market.

So if great founders or potentially great founders are going to raise $10 to $20 because someone else is going to do the deal at that price, you get to say yes or no. So I think if you think that is an important company and one that you want to be part of, you have to say yes.

And there's two conditions that allow for those starting points to not materially change the economics in venture: if the outcome sizes are bigger. So if, you know, you think about 10 years ago, the idea of building a $10 billion company was far-fetched.

Today, that is sort of like you have to sit and look at an early-stage company and try to squint and get there as a sort of normal outcome versus a billion. So I think there's a change factor there.

And then you see anomalies well past that in terms of valuation or even acquisition or our future IPOs. And then the second one is the lack of dilution. So as an early-stage investor, to me, in the companies that tend to hockey stick very quickly, the Series B, C, D are dramatically less dilutive to the founders and the early cap table than in the past.

They are raising these later-stage rounds at 3 to 8% dilution instead of 12 to 20%. And if you take that across multiple rounds, your early-stage investment just gets diluted less. And that is an economic factor. Now, we Box Group, we invest in a wider set of companies, which you've criticized before many times for not an ownership focus.

If our entire portfolio is filled with $20M seeds at, you know, $200M pre, do I think that the business has fundamentally changed? Yes. And so you have to find in this market of, you know, in this market of varied entry points for early-stage investing, I think you have to have a portfolio balance, but not on an individual deal basis.

**Harry Stebbings** [9:15]
Totally get that in terms of portfolio balance, kind of on a blending entry price and making it a little bit more palatable. You said there about my criticizing your portfolio.

**David Tisch** [9:24]
I mean, speaking about it, I didn't use the word criticize on purpose.

**Harry Stebbings** [9:27]
No, I do. Trust me. I think one of the most important things to look for in anyone, actually, personal or professional, is like someone who's willing to, like, admit that they were wrong. I have no problem admitting that I was wrong.

And what I was wrong on, very specifically, I think, is like not seeing outcome size expansion in the way that we have done. And that's very rigid-minded of me, which is my fault. But it's enabled incredible returns from companies with smaller checks and not having ownership, so to speak.

How would you characterize what I got wrong? Did I do a good job of it there? Like, you can own me for it.

**David Tisch** [10:08]
I want, like, a soundtrack as you're doing that. So if we could add post-production music in.

**Harry Stebbings** [10:14]
Oh, yeah, we will.

**David Tisch** [10:15]
It'll go a little wider on the.

**Harry Stebbings** [10:18]
It's kind of like lose, you know, lose yourself the first kind of 30 seconds beat.

**David Tisch** [10:23]
Just like a little background music.

**Harry Stebbings** [10:25]
Yeah.

**David Tisch** [10:26]
Harry getting deep.

No, I think that I've always believed that venture is a pure power law dynamic industry. You have to be in the outliers. And the idea that me or you, to pick on both of us, are going to be able to find and buy 10 to 20% of a true outlier in the seed round and beat the rest of the market, which I truly think, you know, a lot of, not all, are great at their jobs.

You're going to fight them head to head and convince the founder to pick you, and that's the company that matters. I think it's a lot of steps that you have to believe to get that businessright. And so I've never understood trying to compete head to head against who I would deem to be the best VCs in the world.

And I think these are brands and these are people that have spent decades building, you know, what their organization stands for and attracting the best set of founders to want them in their deal. And I think those multi-stage firms that have been around for a long time are really, really good at seed investing.

And so.

**Harry Stebbings** [11:47]
In a way that they weren't before, huh?

**David Tisch** [11:50]
They're more concentrated, focused on it, and they're more accessible, and they're more efficient, and the market's more efficient. I think founders know how to reach them and know how to run a process very differently than in the past.

So I think post-COVID, there's a tremendous efficiency in the fundraising market. Competitive deals that used to be 3 to 5 term sheets in an early-stage round can these days be 10 to 15. Or it's purposely only 3 to 5, but those 3 to 5 are really competing against each other.

And I think that is, again, something you can complain about or just accept the market conditions. And so for us, the belief has always been we have to be able to invest in the people that we meet that we think are the best.

And we can't let our business get in the way of it. And so to me, the thing that you got wrong is two pieces. One is the math. Our business math on our side as a venture manager that has LPs that needs to return our capital to LPs at an outlier way, I think you didn't do the mathright.

And I think a lot of people don't appreciate that our business makes sense. And that's okay. We like what we do.

**Harry Stebbings** [13:09]
And I specifically didn't do the mathright because I didn't see the outcome size expanding. Is that it? You've got the numbers.

**David Tisch** [13:15]
Well, the second part is, yeah, maybe that's it, or maybe the lack of dilution part that I made before is what you get at the beginning actually stays pretty consistent. Whereas I think in the past, you would probably put, like, a negative 80% on that number.

**Harry Stebbings** [13:31]
Well, Jason Lemkin, who I do a lot of shows with every week, we do the weekly show, and he's like, "100%, 60%, you'll be diluted." Is that not true in your.

**David Tisch** [13:41]
I don't think in the best companies. Now, like, not every company goes up into theright and never sort of runs into bumps. I think the macro, when you get big, can cause some bumps in valuation. You're seeing itright now in some of the biggest labs going out and trying to raise rounds and sort of reevaluating the price that they're raising at.

If you go back in history, like Uber, Facebook, Airbnb, Ramp, which I think is one of the best modern companies ever, they've all had a bump, a down round. And so I don't think it's always just up into theright.

But I think in this specific sort of three-year window, there is a lot of continued momentum in terms of valuations. But the second piece, which I think is related to the first piece that I think concentrated funds dismiss, is there is an adverse selection in the concentrated model of what gets in versus what you want to get in.

Meaning every concentrated manager will say that we win 90% of the deals we want to win. And I think that's total BS. I think it's like 20%. And so in a given fund cycle, if you're funding 30 companies that you have this immense conviction in, concentration of 30 names with 10%, you need, obviously you need because it's vital, need 10% of the company in order to make the deal work.

I think you actually offer that deal to upwards of 120, maybe 150 companies to get your 30. And I don't think people admit that. So I do believe that the best companies, the ones you're most excited about, don't always make it into the portfolio.

And so just because you have 30 that you own 10% of, it doesn't mean those are the 30 that you would have liked to be in that portfolio. I think in our model, what we're able to do is get into more of the companies that we're excited about than other people.

**Harry Stebbings** [15:49]
I get that. You know what worries me there's so much and I'm asking here, but it worries me is I completely agree with you in terms of that supposed win rate. And what happens now, though, is they just say, "David, okay, fuck it, I lost to Sequoia and Box Group.

Let's do another round. I'll do it at 800." I know David just did the first tranche at 400, but I'll do it at 800 today. And for the founders, it's like, "Well, good deal. Nothing's changed in the company.

I get more money at double the price." I think it distorts companies and really.

**David Tisch** [16:22]
What are you worried about?

**Harry Stebbings** [16:23]
I'm worried about founders losing focus and becoming distracted with way too much money way too quickly.

**David Tisch** [16:29]
That is like a babysitting problem. Sometimes that's going to happen, for sure. But to attribute that fear to every founder, some founders are going to tremendously benefit from having more runway, higher valuation, more momentum, more buzz in order to recruit people, in order to show that there are believers that think this can be huge so that they can justify to customers to get early partners.

If you are a great founder, and it doesn't mean all of them are going to do it properly, you have to take all the conditions that you've chosen to take on. So if you took on two tranches, if you took on high valuations, if you took on a lot of money, you're going to have to use those variables and execute your company building in a different way than if you're super capital constrained.

I think the Lean Startup was a total fake. It was a, like, stupid, like, brainwash that happened for 10 years with, like, professors and books and tweets and blog posts that was just, like, totally awful. And I think it sent people, like, the wrong message.

### Lean startup

**Harry Stebbings** [17:37]
Why was it totally awful?

**David Tisch** [17:39]
Because name a company that actually ran the Lean Startup playbook that worked. One. Every company, if you're going to be actually successful, needs a lot of money, especially today.

**Harry Stebbings** [17:51]
But, like, 37 Signals is one that's not.

**David Tisch** [17:54]
Yeah, some bootstrap companies, but if you want to get on the venture flywheel, Lean is not the answer. Like, inevitably, you're going to be fat. You're not going to be lean. You have to be. It doesn't mean undisciplined,right?

The difference between the word, like, lean and the word well-funded is not lack of discipline. It's just not automatically attributable. Does that mean that every company that raises a ton of money is going to be well-disciplined? No, there's going to be, again, back to where we started, bad companies.

**Harry Stebbings** [18:27]
Well, you do tranche rounds. If a founder says, "So you'll invest."

**David Tisch** [18:31]
I don't like them. But, like, again, there's the, like, emotional reaction and the business decision. And those are very decoupled.

**Harry Stebbings** [18:40]
But you will do the second or third tranche.

**David Tisch** [18:42]
Don't put this on it. I don't want founders to know that we'll just rip checks into tranche rounds, but yeah.

**Harry Stebbings** [18:47]
Whenever, like, I would.

**David Tisch** [18:49]
I don't want to. I would like to invest at the lower price.

**Harry Stebbings** [18:53]
I'm too arrogant. I'm fuck off. This is a partnership.

**David Tisch** [18:57]
I get it, but that's your problem. Get a shrink.

**Harry Stebbings** [18:59]
I didn't need a fucking shrink. This is a partnership, and you're saying you're inherently less valuable than them. Well, fine. Just don't take me then.

**David Tisch** [19:07]
Okay. That's their choice. And guess what? They're not going to take you. And you can go back and you can choose that company is not going to be. That's a yes-no decision. That's it. And so as.

**Harry Stebbings** [19:18]
But you're happy then to just to take that.

**David Tisch** [19:21]
I didn't say happy. That's now an emotional attribute.

**Harry Stebbings** [19:25]
I will, like.

**David Tisch** [19:26]
I will be sad and take it. That's like a different thing. You will succumb.

**Harry Stebbings** [19:32]
I will be sad.

**David Tisch** [19:33]
You will just admit that this is sad and fall in line. I think it's our responsibility to earn theright to do what we want to do versus what a founder is offering us. And so, again, beg. You can beg to have an entrepreneur do what you're asking him to do.

So if there's two tranches, I would like to enter in the lower tranche. I need to convince the founder to allow me to do that. And if I don't, it's a me problem.

**Harry Stebbings** [20:08]
I would like the lower tranche, please.

**David Tisch** [20:10]
Yeah.

**Harry Stebbings** [20:11]
Cake or death. Cake or death. Cake, please.

**David Tisch** [20:14]
And then they say no. And then you're like, "Pretty please." And then they say no again. And then you have to, like, beg differently.

**Harry Stebbings** [20:22]
Come on, please. I'm just a little seed fund. Come on.

**David Tisch** [20:26]
You have to use all your little sale tactics, and then you get rejected. But, like, is that an enjoyable market condition that's been emerging more and more in the past couple of years? No. Do I, like, if I am sitting there and I view it as, like, not the founder that tranched us, but the other VC, it's good to know,right?

I also have a long memory.

**Harry Stebbings** [20:50]
Whoa, scathing.

**David Tisch** [20:51]
But it is,right? Like, you have decided that I will pay another price. Not the founder. You've created the structure of this deal such that I am not sitting on the cap table with you. I am pushed to a different product than you get to invest in.

That means when we have early-stage investments and are going out to market to help them raise capital, if I get to be a voice in the ear of a founder, I have opinions too.

**Harry Stebbings** [21:20]
Remember, I was on your side, David. I was always on your side.

**David Tisch** [21:23]
I was on your side. Come on. But I mean it,right? Like, there's people to meright now, and this happens in hot market conditions, that are playing the short game, and there's people that play a long game. And I think one of the.

**Harry Stebbings** [21:36]
They're playing a short game because they're cutting people out. They're pushing them into second tranches.

**David Tisch** [21:40]
It's like, I just think, like, there's a set of relationships that you build in this business because we're all dependent upon each other in very different ways that ebb and flow in different times, in different conditions, in different companies, that if you're in the business of maintaining and building long-term relationships, you're going to choose certain behaviors over others in different moments.

### BoxGroup model

**David Tisch** [22:04]
And the thing that we've done at Box Group that I think is different than a lot of other firms as they've built is we've stayed very true to who we are. We do early-stage investing. We try to be there on day one.

We don't take our problems and put them in front of founders. We try to be as helpful as we can be, and we try to be founder-friendly in every step of the way. Does that work perfectly every time?

No. But that's the intention. So we write

checks that are not needing of ownership. We don't sit on boards. We don't write competitive term sheets. We are happy to lead a deal. We are happy to help a founder get in business with some money. We're happy to be totally creative in how we invest, but it's oriented around early-stage and getting in at that dream level.

**Harry Stebbings** [22:56]
What is the average ownership?

**David Tisch** [22:58]
I don't know. That's a math question.

**Harry Stebbings** [23:00]
But, like, is it, like, genuine? Is it, like, 5%, 2%?

**David Tisch** [23:05]
There are deals we do where we own at the initial check 1%. There's deals we do at 10% and everything in between.

**Harry Stebbings** [23:14]
But there's no too low.

**David Tisch** [23:16]
Again, that's an emotional thing, not a business thing. I'm sad if we have to write a really small check, but it comes down to, like, yes or no. When does that happen the most frequently? When we get to a deal late.

When you meet a founder and the deal's in process, you're now begging for scraps, as you should. And that's our fault for getting to something late. And that's something we can do better as a firm is meet founders earlier in their journey.

And if we didn't do it, we need to figure out internally, like, what could we have done better to meet a founder before there was a company.

**Harry Stebbings** [23:54]
Can I ask you, what's your win rate?

**David Tisch** [23:56]
So different market conditions, it ebbs and flows probably between

70 and 90%. And I think the single factor that causes us to lose the most is getting to something too late. Like, speed of our decision-making and accessing the opportunity are the two factors that we control that hurt us the most.

There's a subset of companies that just meet us and don't want us, but that's harder to course correct because you almost don't know why they didn't like you. It's like a, I don't know, an EQ emotional outcome or they didn't think you were valuable enough or maybe they referenced you and they got something that said, like, not as good as you need them to be.

I think we care a lot about those situations, but I think that happens sometimes. The ones that I think we organizationally can work on is how do we get to everything before everybody else? And I think that's the obsession.

We're a team of 10 investors. There are six partners at the firm. We've all worked together for a long time. We all like each other, and we all do the work. Like, our job every day is to wake up and meet the next founder that we're excited to back.

**Harry Stebbings** [25:18]
I think both of us having flexibility to not have to be lead. Like, I think, again, I admitted my wrongdoing. I turned down great businesses over time because of ownership, and it was just terrible decisions. And so now we invest very differently.

You know, we will absolutely do the 1 or 2% if we think it's an unbelievable founder and it's an amazing opportunity. So great. That means I never lose because I will just do a smaller check. Well, not never, but you know what I mean.

Rarely lose because we.

**David Tisch** [25:52]
Yeah.

**Harry Stebbings** [25:53]
But if I had to only lead, that would come down dramatically. And so my question to you is, do the pure-play lead-only seed funds still have a business in a world where.

**David Tisch** [26:07]
What are the pure-play lead-only seed funds left?

**Harry Stebbings** [26:11]
I mean, I think you've got your, like, uncorps, your floodgates, your, I mean, sucer no. First round?

**David Tisch** [26:21]
I think they've moved into a different style of investing and more flexible and play it a little bit later when necessary on, like, strategic purpose.

**Harry Stebbings** [26:33]
So what you're saying is that business doesn't exist anymore.

**David Tisch** [26:37]
I don't want to be in that business.

**Harry Stebbings** [26:39]
And why is that?

**David Tisch** [26:41]
Because I don't think you can compete against the greatest firms in the world who are running that strategy as part of what they do.

**Harry Stebbings** [26:49]
With much less price sensitivity and much bigger checkbooks.

**David Tisch** [26:52]
Yeah, I don't even think that's a factor. They're great at what they do. I, like, very much pedestal.

**Harry Stebbings** [26:58]
I do think it is a factor. We have lost to, like, a GC of the world, and with respect, a junior there, and I don't mean that disparagingly, but someone who is more junior because they often treble the price and treble the check.

I agree with the founder for taking it, like, holy within yourright to do it, but that's why.

**David Tisch** [27:18]
Yeah, but I, like, it's an offer in the market, a free market, and I think they take the majority, the air out of the room if you're trying to compete for, you know, I'm going to lead, sit on your board or not sit on your board, but I need 10 to 15% of your seed company.

I just think there's a greater efficiency to access the multi-stage firms, and the multi-stage firms are happy to do those deals. I also think, like, what you've seen happen is it used to be a lot of firms would be like, "OK, I'm not going to do this.

I want to wait to see this at the A," or "I'm not going to do this at the A. I want to wait to see this at the B." And what's happened is they don't get to see it.

Like, that might have been your only shot to do the deal because there's an efficiency in the market, and there's other people that also want to do it at the B, and you might lose there, and you might lose at the C.

And so what you're seeing is if Sequoia wins, it might mean that, you know, Andreessen or Kliner or someone else needs to immediately come into the next round because they know that that's the best probability they have of getting a real check into that company, and they do it quickly, and they do it aggressively.

And I think that if you lose head-to-head in a seed, in an A, in a B, you can either sort of put your tail between your legs and call it a day, or you can try to figure out a new entry point with minimal progress and minimal developments to get your check into that company if you believe that was an important one.

**Harry Stebbings** [28:55]
I think it's an amazing point that there was a willingness to wait before that's now gone. I think that's absolutelyright and very pertinent. Can I ask you, I speak to so many LPs. As we said, they love to talk, and every LP wants one category of venture.

We want the pure-play seed investor in Silicon Valley, small fund, under $100 million, pure-play seed. And I go, that is the single worst fucking segment to be in. Like, that's the one segment you don't want to be in.

And they all kind of look at me rather horrified. What advice would you give an LP when they look at the segments today and go, "Ah, I want pure-play seed in San Francisco as my bucket"?

**David Tisch** [29:38]
I think there are three different stakeholders in our industry, and their incentives and current conditions are very decoupled for, you know, probably the most frustrated each. Like, we're in a founder world. I think GPs are struggling to have a very static and focused strategy because we're in a founder-friendly world.

And I think LPs are frustrated because they want certain versions of exposure or portfolio construction that basically aren't available. I don't think there's an easy solve for the LP problems, and I don't think there's a clean way to operate as a GP in an ever-changing market that is very complicatedright now.

And so I think founders get the leverage. They get to raise capital from people they like at prices that they like, and you as a GP can say yes or no. And on the LP side, they're going to look at your portfolio construction, your entry point, your ownership, and then a lot of the multi-stage funds have multiple products that LPs will tell you and me that they don't like to do, but yet it's going to be the majority of their allocation into ventures going to go to the multi-stage firms that are established that are a way to get scaled capital into the industry and, frankly, like, exposure to some of the best companies in the industry through that.

So your question is around, like, the LP conditions. I believe my relationship with our partners is one of truth. We invest out of a $275M seed fundright now. It will invest in around 150 companies. So we are pure-play seed with lack of a focus on ownership and concentration.

There is a large cohort of LPs that are confused by our math and don't think it works and that don't believe in our model.

**Harry Stebbings** [31:51]
You do 50 companies a year.

**David Tisch** [31:53]
A little more, probably.

**Harry Stebbings** [31:55]
David, do you remember them all?

**David Tisch** [31:57]
Yeah. I don't know what the other people who do one to two deals a year do all day.

**Harry Stebbings** [32:03]
Podcast.

**David Tisch** [32:03]
That also confuses me.

**Harry Stebbings** [32:04]
Podcast.

**David Tisch** [32:07]
Like, it sounds lovely. There are LPs that don't believe in our math. Our math works. Like, I know our math works. I see our math, and I think our partners also believe our math works, and that's awesome because our model's terrible if the math doesn't work.

**Harry Stebbings** [32:24]
From a liquid returns basis, what has been the single best investment?

### Cursor

**David Tisch** [32:29]
We were fortunate enough to have met Cursor sort of before they were working on the business that scaled, and my partner Claire got to know Michael when they were investing on Dorm Room Fund together, and we were in the earliest round of Cursor, which.

**Harry Stebbings** [32:51]
Did that return the fund?

**David Tisch** [32:53]
Yes.

**Harry Stebbings** [32:54]
Multiple times.

**David Tisch** [32:56]
Yeah.

**Harry Stebbings** [32:56]
I told you this model doesn't work, David.

**David Tisch** [32:58]
I know.

**Harry Stebbings** [32:59]
You didn't listen.

**David Tisch** [33:00]
I know. I got a better math.

**Harry Stebbings** [33:03]
You were stubborn.

**David Tisch** [33:04]
Our Excel sheet broke. I tried to update it one day and.

**Harry Stebbings** [33:07]
Do you know what's astonishing with that, and I'm really pleased you chose that, actually, as an example, which is the speed to that enterprise value is four years. I thought every LP was moaning that venture's taking too long.

Now we're seeing open router. Was open router one of yours?

**David Tisch** [33:22]
It was not.

**Harry Stebbings** [33:23]
Oh, bugger. It wasn't one of mine.

**David Tisch** [33:24]
I know. Next time.

**Harry Stebbings** [33:25]
Next time. But, like, you know, this was whatever, two years to $8 billion?

**David Tisch** [33:31]
I think the speed of company creation, growth, explosion is different, and I also think underlying, like, Blessed have been in the early part of the Cursor story, and I think, you know, what they did and accomplished is truly sensational, and it's a generational outcome.

It's the biggest venture M&A deal in history. We were just lucky to have been there early. I think underlying, like, in the fund that Cursor sits in, in the early-stage fund that Cursor sits in, for me, what I love is there's 10 other companies that are fascinating, and they're just taking a slightly more reasonable timeline to grow and compound.

Do I think any of them, like, will get to the accomplishment of how big and great Cursor was? I don't know, and that's not, like, a binary. They did it or didn't, but I think what you have to appreciate in this early-stage investing is that things take time.

We were the earliest investor in a company called Clay. Clay is a bumpy four-year road to explosive growth and now is growing and compounding what they're doing in an amazing way, but it's not a clean, perfect story. And I think it takes learning, and it takes iteration and developing their go-to-market that got them to where they are at today.

Base 10. We're in the seed round of Base 10. You needed inference to sort of become a space, and Base 10 today is a full outlier company, and they're running at full speed and sort of hitting that hockey stick fully, but it wasn't this just start up and to theright.

### Founder quality

**Harry Stebbings** [35:23]
Do you think the best companies are generally immediately obvious, or do you think, actually, the value is generally actually in the messy middle in the ones you don't expect?

**David Tisch** [35:32]
I think there are signs early on that a founder is running the experiment at a world-class level, and that is either they are hiring total outlier people to join them quickly, they are finding customers that are inaccessible early, and you're almost confused as to how they're getting so far ahead so quickly, and it's a lot of the time some combination of the product and the go-to-market conversations that they're having or they pick theright idea.

But I think there are always challenges and bumps, and sometimes those are prolonged, and sometimes those are immediate. And so what you're really identifying is, can this founding team navigate? Again, like, I think the market is so complicated today.

We spend time and we ask young people. We go to college campuses a lot. We were up at Harvard and MIT recently and talking to undergrads, and I asked, like, raise your hand if you have a vision for what the world is in 10 years, which is our job, and which, if you go back in time, young people, old people, there was, like, I can see what the world's like in 10 years or some guess of it.

No hands went up, and I'm like, five years? One hand. Two years. That's when you started to get some hands. And I think that's what people are feeling today is uncertainty as to the timelines of what the future looks like.

And when you're in this moment of AI and you have people saying, "We're all about to die from AI," and you have other people saying, "We're entering an age of abundance and free-flowing markets that will change the way labor forces work," like, that's a pretty wide gap between the prediction of the future.

And then you have the models rolling out frequently with major innovations that in some way are important to a subset of companies, but in the end, not every company is going to need the cutting-edge, bleeding-edge model. And so you're watching this age of AI deployment, AI adoption, and it's going to impact people differently at different speeds.

So it's complicated. And then you're seeing AI impact the physical world, science, all these spaces that felt hard to access before that are getting opened up because of this horizontal technology shift. So there's just a ton of uncertainty.

I think you feel it in the public markets. You see it with compute access, compute pricing, energy, data centers, the politics around all of it. This is complicated. And so when you're asked to predict the future, I don't know that anybody sits here today and actually has an answer.

And it's cool that people come on podcasts or tweet or do whatever they do and say, like, "I know where the world's going," and you're like, "No, you don't." So I think what you're looking for in today's founders are people that are capable of real-time navigating ever-changing conditions that are insanely fast and insanely complicated.

And so to your question of, like, do you fund somebody and know it immediately? No, because I think the world's changing too quickly today for that to be a condition.

**Harry Stebbings** [39:01]
Do you think the founders that succeed today are different from those in the past? Yeah, if I look at the founders, I mean, they're inherently a lot more technical. There's a lot fewer sales-led founders today than there are.

**David Tisch** [39:17]
You're in a moment of that,right? And so the question to me is, like, if you're an early-stage investor, is there two years out when actually sales matter again in some way and go-to-market becomes the differentiator? And if that's the answer, you should fund those people today because their exposure to the bigger markets is not going to be as purely relevant for, like, one to four years when their company is a bit further along, their product's ready.

And so if that is your bet, it actually makes sense to start rotating a little differently today than sort of you can't, as an early-stage investor, solve an immediate opportunity or need. Nothing goes fast enough. And so, but I do.

I think the founders today are more technical in, you know, a non-offensive way, smarter than ever before. I think there's, like, less opportunity for mediocrity to succeed, and you can't just, like, identify a gap in a business market and go attack it with, like, laissez-faire approaches.

You have to be so good in order to winright now. And, you know, you saw, I don't know if you saw the Scott Woo video that went viral where he's doing counting of you're like, "I can't compete with that.

I can't compete with that." Right.

**Harry Stebbings** [40:37]
I saw a great one, which is cognition is just a wrapper around Scott Woo.

**David Tisch** [40:42]
But you have to, if you look at every companyright now that to me is becoming an outlier, the founder quality of each of them is really, really impressive. And I think that that, like, there was an era where, like, everybody was told you should start a company.

Everybody should start a company, and I don't think we're there anymore. I think it's, like, can everybody start a business? Sure. And I think that's okay. And I think the word company and business are in some way different, and venture capital for probably 10 years was funding a lot of categories that were not capable of becoming as big as maybe you thought at the beginning because what they were aiming for was a bit smaller.

I think today the appetite for scale from the venture product is uncompromisable because you need to get huge to make the math work. And I think the founders' ambitions today are, like, A, huge, and B, the opportunity set feels unlimited.

**Harry Stebbings** [41:55]
I don't want to, like, singularize a company, but it's a company that we both know and everyone will know, which is a testament to its success. But, like, would you fund, like, a Harry's today?

**David Tisch** [42:04]
I think Jeff and Andy from Harry's are, like, world-class founders that if you put inside of any company, they would build something of importance and of meaning. We at Box Group have stopped funding brands, not because I actually think they're small.

I don't think you can fund brands at seed because brands, to me, are built off of your initial data set of, like, does the brand resonate? Does the product resonate? Do people buy it? Do you have, like, customer LTV or CAC to LTV ratios that make sense?

And you don't get any of that data at seed. I think one of, like, the more interesting investor products out there is, like, doing brand investing at Series A. I don't think it fits in your traditional venture firms today, but I think there's a subset of investors that fund brands.

If you look at the beverage industry as a great example, if you look at some of the QSRs, if you look at, you know, personal care, there are scaling brands that are fascinating businesses. I just don't think where we sit today, we're equipped to invest pre-momentum.

**Harry Stebbings** [43:20]
Can I ask one thing that I see? You said it's very much a founders' market earlier. They can choose the price they want with the people they want.

**David Tisch** [43:26]
Yes.

**Harry Stebbings** [43:28]
To me, it's like a real haves and have-nots, which is, like, there are three categories where if you're in that category, how.

**David Tisch** [43:34]
There are three categories of haves and have-nots? That's you only named two.

**Harry Stebbings** [43:38]
No, three categories of interesting company that investors just go nuts for, and obviously, it's more than three, but a small number. And if you're not in that, even if you are in AI for X, investors are like, "Nah, not interesting.

Not in compute, not in inference, not in data centers, not in chips, whatever," and you're instantly dismissed. Do you see that too?

### Rogo

**David Tisch** [44:02]
But I, again, come back to founder quality and founder ambition and execution. So we were in the earliest round of a company called Rogo. They were building AI for finance. Gabe finally told the story, but after the seed round, I helped them go out to try to raise an A.

I put my name behind this company fully, and I'm like, "Rogo is going after something huge, and Gabe is sensational." And I sent it out to make up a number. He said 40. We can say 40. 40 Series A lead investors.

He got fully passed on by 39 of them.

**Harry Stebbings** [44:42]
Did Keith do that round?

**David Tisch** [44:44]
Keith did that round. So 39 knows. This is now a consensus company. It has now been funded by Keith led the A. Sequoia did it. Kleiner did it.

**Harry Stebbings** [44:58]
Do you doubt yourself?

**David Tisch** [45:00]
Yeah.

**Harry Stebbings** [45:01]
In that? You do, or you just think, "God, the mimicry of this market's ridiculous"?

**David Tisch** [45:05]
Both. Well, I just get sad. I'm like, I've, like, done this a long time. I'm, like, telling you to spend time here, and some of the passes were quick of, like, "We don't think this is interesting," or, like, "We don't know that this could get big," or, "They don't have enough traction," whatever they were.

But I just think there are companies in this moment of your point of, like, kingmaking, haves, have-nots that are misread at different stages and then become one of the other categories. And so that, to me, means, as it should be, early stage is not a perfect market, and there's not perfect information.

There are going to be companies that are not in the zeitgeist, off the radar, that compound value, compound momentum, and build something that's very important before or outside of the immediacy of those funding conditions. And I think Rogo, to me, was, like, totally misinterpreted by a series of investors at a specific point in time, kept building, kept getting better, and then, I think, in theright way, rewarded for, you know, the execution of what they've done.

**Harry Stebbings** [46:23]
And you do follow-on checks into just the next round, next two rounds?

**David Tisch** [46:27]
No, so we operate today two funds. They're both $275 million. So it's a core seed fund, and then we do a follow-on fund. We write sort of 20 to 30 lean-in checks into companies, almost all from our portfolio.

**Harry Stebbings** [46:46]
And the lean-in checks are $5 million, give or take?

**David Tisch** [46:49]
5 to 30.

**Harry Stebbings** [46:50]
And that's across the A and the B, the next couple of rounds?

**David Tisch** [46:53]
Yeah.

**Harry Stebbings** [46:55]
What's the most you've ever invested in a company across the two?

**David Tisch** [46:59]
Probably $40 million.

**Harry Stebbings** [47:02]
Which company was that?

**David Tisch** [47:03]
I mean, we've written substantial checks into Ramp, into Clay, into Baseten, into Rogo, into Tandem, into.

**Harry Stebbings** [47:13]
Which did you not, and on reflection, what did you not see?

**David Tisch** [47:18]
Oh, we don't, which did we not write a big check into?

**Harry Stebbings** [47:22]
Yeah, like, you did a first check.

**David Tisch** [47:23]
Well, sometimes you can't, sometimes you can't get more than your pro rata in companies, and that's a fight for allocation in future rounds. And that might be the founder choosing not to take a bigger check from you. So that's one condition.

And then the other condition is, like, we misread the company and didn't lean in hard enough when we could have. And I think we're not a perfect, we don't make perfect decisions. I wish we did. So I look back, and there are so many opportunities of great companies that we were fortunate enough to be early in that we were too slow to react to.

And.

**Harry Stebbings** [48:04]
Is that one that you think of first there, and what do you not see?

**David Tisch** [48:07]
I think of a lot, but I think we're, like, incredibly fortunate to be in business with that founder at the earliest stage. And I think our job is to, like, continue to help them in the ways that they ask us to help them and make our customers, who are the founders, happy.

### Pro rata

**Harry Stebbings** [48:26]
David, is pro rata aright? We saw this.

**David Tisch** [48:30]
No.

**Harry Stebbings** [48:30]
Is it?

**David Tisch** [48:30]
No, like, do I think a bunch of the VCs that are the early-stage VCs that are out there saying, like, "We don't need pro rata. We're going to, like, give it up," like, it's all marketing garbage. It's just nonsense.

Like, I can write a blog post too. I just don't believe that that it's that black and white. I believe theright to invest in subsequent rounds is earned. So whether you have it in the documents or not, it's earned.

There are multiple factors that go into it. So having it in the documents, to me, is more helpful for the founder than for you as a firm. If you as a firm are asked by the founder to step back for whatever reason, that is up to you to say yes or no, knowing that if you say no, you are getting into a fight that you are likely going to lose in some form.

You are either going to lose it financially and that you're not going to get your pro rata because of whatever mechanism can be used to remove your pro rata, or, more importantly, you're going to lose it because of reputation.

You are going to piss off the founder, and they are not going to like you anymore. So if you say no to a founder and you want to take reputational risk, that's on you. So why is it important to have it in the documents?

Because I think that funds that follow you into rounds in the A and the B, they are happy to squash you in any way they can. And the more that you have it in the documents, the more leverage a founder has to negotiate the terms of their next round.

So if a firm comes in and says, "We want 22%," and you look at your cap table and you're like, "I have 6% of my cap table that needs pro rata," you're able to actually create more leverage with your follow-on investor to say, like, "That map doesn't work for me.

I would like to redo this." And then you can use that in help of your negotiation.

**Harry Stebbings** [50:31]
Do you see large firms being more ownership-hungry or more willing to accept less ownership?

**David Tisch** [50:38]
Haves and have-nots. So I think there are firms sometimes that need 20% in a deal, and then you're like, "But last week, you did a deal at 5%." And I see it because I'm in that deal too. And so I always think that's funny when the word need comes up in venture, and you're like, "I know what need means," and it does not mean need.

It means I'd like, like, I hope for, but it doesn't mean actually a binary need. I think within the big firms, there are very different style actors. I think there are people who are on the way up or competitive inside of their firm that behave one way, and there are people that are very confident in their position at a firm and their standing and their success that behave a different way.

And, you know, you can say junior or senior, whatever terminology you want to use for that, but I think that, you know, relationships matter. There are times when we send a deal to a multi-stage firm, and they write the term sheet and then try to squash us.

And I'm like, "That's weird." Like, those tend to be, again, this orientation towards short-term decision-making versus long-term and not appreciating the consistency of a relationship. And I think, again, I've been doing this a long time. There are people that you build great relationships with that tend not to have overly sharp elbows with you.

And then sometimes you catch an elbow out of nowhere, and you're like, "Ooh, I didn't see that one coming."

**Harry Stebbings** [52:09]
Who, when they send you a deal, do you pay most attention to?

**David Tisch** [52:12]
Great founders. That's who I pay the most attention to. When founders inside of our portfolio, and I don't think it's the best ones only. I think it's the founders who we believe have high-quality taste bars and high-quality networks.

When those people send you someone they know, someone they like, that's when you pay the most attention.

**Harry Stebbings** [52:31]
When you look at one part of our business, it's investing, and the other part is also bluntly making money for our LPs and selling, and we have very liquid secondary markets today. How do you think about that and taking cash off the table when there is so much demand for some of these names?

**David Tisch** [52:50]
I work for our LPs, and my customers are founders. And that, I think, is a totally, again, dislocated two sets of relationships. My job is, as you said, to give the people who believe in us and invest money in us as much money as I possibly can.

And one way to do that is to try to get out of positions at different times. And there's a risk to it. And there's a financial risk to it and a relationship, a sort of reputational risk to it.

And I think that's a really important thing to balance. So on, like, in general, we don't sell early. We believe we are investing at the seed stage to join the founder for their journey. And that could be 15 years.

It could be 20 years. It could be four years. But selling early, to me, risks two things. One is, like, if a founder doesn't want you to sell early, you're risking reputational risk and relationship with that founder. In this market, a lot of founders are taking secondary.

So you could argue, like, "If you're doing it, I can do it." I don't think that's necessarily theright framework. I really don't. And I can talk about why, but I don't use that framework to think about it. And then the second one, I think the best companies compound the most at the end,right?

Going from, like, a $2 billion to a $4 billion to an $8 billion company is easier than going from $0 to a billion. And if you believe that you are in a company that's great, I don't see why you would get out early.

I think you're leaving the most money on the table by getting out of something early. And I really don't want to do that. I want to see it through. And if I still believe in a company or one of my partners believes in a company, I don't think de-risking it is theright answer.

We're in the business of risk, and we should

stay investors in the companies that are going to keep compounding because every turn you have at the end is a big win for your LPs and for your firm and for the founders.

**Harry Stebbings** [55:06]
Why do you not think that if a founder's taking money off the table, investors should maybe do the same?

**David Tisch** [55:12]
Because I think founders have a different set of economic conditions that are not related to what investors have. Let's say a founder has debt. Let's say a founder is living in a place that creates stress and overhead cognitively for their life.

And in reality, having some money to improve some things outside of work allows them to be better at their company. Or knowing that I have $10, $20, $30 million in my pocket, I am now willing to see this through.

I'm willing to have bigger risk appetite to, like, go for it because I feel some safety net. I don't think that that is the same risk analysis that a VC uses to be like, "I need to take, you know, 20% of my position off here to, like, make my fund math look good or tell my partners I, you know, took some money out of this thing."

I just think they're totally different. Or giving early employees, like, a tender offer and allowing them to have some early liquidity, I think it could help with retention. I think it could keep a lot of those employees happy and engaged and, you know, excited to work at a company, knowing that they offer tenders every couple of years.

We have a bunch of companies in our portfolio that are regularly doing tenders to the employee base, and I think that that's an incredibly valuable culture to set and a retention tactic. And so I just don't believe that they're always related.

**Harry Stebbings** [56:52]
What did you believe about venture that you now no longer believe, David?

**David Tisch** [56:56]
I just took a while to see,right? Every firm thinks they're in the top decile,right?

**Harry Stebbings** [57:02]
I've never heard any firm be like, "No, we're bottom quartile."

**David Tisch** [57:06]
Right. So I'm, like, waiting to meet all the bottom three quartile firms in the venture industry. When you hear all the LPs explain that and you look at the data, and it says, you know, "All the returns in venture are aggregated to the top 5, 10% of firms," I just, I don't, I haven't met the others yet.

**Harry Stebbings** [57:26]
Do you think we'll have more or less VCs in five years' time?

### Consolidation

**David Tisch** [57:30]
Less. There's less noise in the venture market than ever before, and there's more competition.

**Harry Stebbings** [57:37]
What do you mean less noise?

**David Tisch** [57:37]
And so you would ask before, there's less new firms.

**Harry Stebbings** [57:40]
Really? It feels like there's more spin-outs than ever before.

**David Tisch** [57:44]
I think there are less. Like, I think on it, I think if you actually look at the data, you know, it takes a long time for firms to go away, even if they're still alive. They become irrelevant. They're not investing a lot.

They might not have raised a new fund. Nobody's sort of taking them off the map. So the names remain, but the activity goes away. You know, you would ask before about, like, sub $100 million in San Francisco concentrated seed funds.

I think I, like, didn't answer that fully. I don't think very many people get into venture and want to stay consistent in doing what they do, meaning the starter VC is a seed fund,right? You get, like, if you're new, if you're sort of unproven, you'll get a $20, $40, $80 million fund, whatever it is, to start.

But your goal is to raise a way bigger fund one day. And when you raise a bigger fund, when you scale your business, when you have partners and scale AUM, your investment style, your stage, your concentration, your check size is all going to fundamentally change.

So when I meet new investors, I always ask, like, "What's Fund 4 look like?" Because Fund 4 is actually your vision. It's the same as when you meet a founder and you ask, like, "What's the big vision?" So I want to know not what Fund 1 is doing today.

I want to know where you're going with this. Because to me, the advice that you give that person should be in line with how do you get to your actual ambition, not how do you execute your starter fund.

And I think what you see in the new firms today is a big ambition. They want to start with something small and get bigger and do something different really quickly. And I think what's I love about what we do here is this is who we are.

This is who we've always been. We are an early-stage firm. We write checks at the very early stage, and we don't have any ambition to do anything else.

**Harry Stebbings** [59:46]
No, but the, but, but, like, to be clear, like, you did just raise, what, $550 across two funds? I mean, the idea.

**David Tisch** [59:54]
We scaled.

**Harry Stebbings** [59:54]
Yeah, the scale has changed.

**David Tisch** [59:56]
We scaled the, the sure, but the same exact investment style. And I think we see founders today come to us and say, "You're doing the same, like, you're exactly where you were 10 years ago when I started my last company."

Maybe the check size is different, but we are not. We as a firm, our DNA, our craft is oriented towards being there at the very beginning, at the dream stage. And that, to me, is, like, what I wake up and get excited about.

And I think that when you look at new venture firms, their ambition is to be a multi-stage firm for the most part. And that's a very competitive part of the market.

**Harry Stebbings** [1:00:34]
It is. I don't actually think they know what their dream is. And I know, and what I mean by that is, like, you know, one thing I would say to young people, and I sound really old, is, like, "Be careful what you wish for because you might just get it."

And I think the truth is, if you know the people at the multi-stage firms, a lot of them are not happy, the ones who are running it, and wish they were the smaller firms.

**David Tisch** [1:00:53]
Yeah, but I think, I think, I think there are different form factors of the multi-stage firm. I think you see Benchmark scaled today, USV scaled today, and the DNA inside of those firms and the relationships inside of those firms are very different than some of your other scaled firms.

I think what Conviction has done is amazing and scaled. I think what Rivet's done is amazing and scaled. And then you go to Thrive. Like, Thrive has created a generational venture firm in a different flavor in a rapid amount of time and challenges at the very top of venture.

And I think the way that they've built that firm is so different than, again, your traditional multi-stage firms. And so I don't think it's as simple as categorizing every firm as the same. I think you have to look at each firm individually and the execution of how they've done it.

I think, like, what Daniel and Nat had done for the moment, that was incredible. And what Elad has done is incredible. And so I think if you all those firms I just mentioned are new,right? In the grand scheme of things, I guess Benchmark and USV are not, but the other ones are new.

And the speed at which they've gotten to where they've gotten is incredible. And the quality of what they've built is incredible. And that was ambitious. And I think when you look at the new firms today, I think the ones that are great are going to execute great and have real ambition and make a real space for themselves in this industry.

And the rest of them are going to go away.

### Picking winners

**Harry Stebbings** [1:02:24]
When you think about finding, picking, and winning, if I were to ask you to review yourself 1 through 3, 1 being best, 2 being mediocre, 3 being worst, how would you review yourself?

**David Tisch** [1:02:40]
I just think we're mid constantly. That's what the kids say. Our obsession at our firm is to see things. We all wake up every day and try to see. I think we see somewhere between 50 and 75% of what we want to see.

Hard to know, but we can always be better there. There's, like, always something out there that we didn't see that we want to see. And getting in front of people, finding a way not just to get in front of them, but for them to take you seriously, that's, like, what we wake up and obsess over.

Winning, when you don't win, it hurts. Like, that is like a, that's like a, "What could we have done better?" It is the area in venture I think you can tactically work to improve. You can try different things.

You can, like, figure out what you can do better. And I think we spend a lot of time on that.

**Harry Stebbings** [1:03:41]
What has that led to? You spent a lot of time on that. And what have you changed as a result?

**David Tisch** [1:03:46]
Everything. I mean, you have to know what tactics to bring to the fight. And that's, like, reading a room and guessing which playbook of really relationship building that you want to use. What does a founder want from you?

What are they looking for? And how do you convince them that you are the answer to what they're looking for? And it really is so founder-dependent. Each, like, there are certain founders that don't want to talk a lot.

There are certain founders that want transactional help. There are certain founders that want a friend, that want a, like, set of experience, that want somebody who is around all the time to bounce things. Like, it's a services industry.

And so the win condition to me is selling your service to the point where a founder wants it. And that's complicated, especially in this market. The picking is the art of this business. And it's so hard. You can look at our firm from afar and assume we say yes more than other firms.

I don't, we don't. We are hyper-focused on saying yes when we should. But that's a really, really hard thing to do at the early stage in real time. And I, I, like, want to tell you I know how to get better at that or we can get better at that.

And yet, like, there comes a point when you're in your career and you've seen enough reps that your taste is your taste. And you're going to say yes. You're like, "Butterflies show up." You're going to say yes. They don't.

You're going to say no. You can convince, like, we think about how to make theright decision a lot and don't know the tactics to get better at it.

**Harry Stebbings** [1:05:38]
David, how many companies do you meet a week as a firm?

**David Tisch** [1:05:41]
A lot. 50 to 100.

**Harry Stebbings** [1:05:43]
So people are meeting 20 companies a week.

**David Tisch** [1:05:46]
Yeah. At least.

**Harry Stebbings** [1:05:48]
OK. And then every Monday you come for an IC and you talk about the five best? Like.

**David Tisch** [1:05:54]
Tuesdays and Thursdays.

**Harry Stebbings** [1:05:56]
Tuesdays and Thursdays. Twice a week. OK.

**David Tisch** [1:05:59]
We use Mondays for work. We are agile with our decision-making. I think groupthink is terrible. We don't vote. Somebody here has to want to do a deal if we're going to do it. Somebody needs to be like, "This is something that I am excited about and I think we should do."

And so I think decisions start with a human on our side being excited about something. And whether that happens inside or outside our meeting is not important. And so if we get to our meeting and one of my partners is like, "I did a deal yesterday."

Great. And equally so, like, "I'm leaning into this. I want to talk through it." Great. We internally don't allow negativity in making early-stage decisions.

**Harry Stebbings** [1:06:48]
What do you mean by that?

**David Tisch** [1:06:49]
If you aren't the person that has spent time with the founders, you aren't allowed to be negative about it.

**Harry Stebbings** [1:06:57]
Right. But what if you know something about the market that you feel.

**David Tisch** [1:07:02]
I don't think anybody knows anything about markets at the early stage. Markets evolve. If you know something about the founders, but we probably diligence that before we're taking meetings and leaning into something. Like, if there are, like, ethical issues, if there's reputational issues with a founder, I think that is an important thing to share.

We don't allow grenades at early stage. You're not allowed to throw a grenade on someone else's deal. Our job is to get to yes. It's, I, if you name a company at early stage, I can tell you why it's going to fail.

Any company. Here are the five risk conditions, and here's why it's going to fail. It's the easiest thing to do. If you've done this for, like, a year, you can guess why a company's going to fail. Your memos that every firm writes are very obvious why it's not going to work.

That's not the job. And by the way, on a probability basis, it's not going to work because 70, 90, whatever the number is, percent of early-stage companies don't work. So you explaining why something isn't going to work is incredibly obvious and incredibly irrelevant.

What the magic of our business is, is squinting and seeing why something is going to work by believing in the thing that you see, that the founder sees, that you are aligned with the founder and seeing is going to work and saying yes.

Our job is to say yes to theright things, not to be fearful of saying yes to the ones that don't work.

**Harry Stebbings** [1:08:33]
Totally get that and understand that. I always love that Google will just build it or the, you know, OpenAI or Anthropic.

**David Tisch** [1:08:40]
Whatever it is. But, but, like, you can't hire. You don't know how to hire. You're not going to get, like, it's not big enough. All these things, they're just not factors for the win. Why is it going to work?

**Harry Stebbings** [1:08:51]
You said that 70 to 90% don't work. Keith, your boys said before, that's dramatically overestimated. And in fact, if you're investing in great people, actually, your loss rate, in other words, it actually really not working, being a zero or close to a zero, is much lower than people think.

**David Tisch** [1:09:08]
I think it's Series A. That's true. I think at seed, it's some real scale of numbers.

**Harry Stebbings** [1:09:16]
You do.

**David Tisch** [1:09:16]
But I think, I think you go one stage ahead and that number is dramatically lower. I also think Keith is a generationally talented investor. And if his loss rate is, I don't know, a tenth of everybody else's, that wouldn't surprise me.

**Harry Stebbings** [1:09:33]
Yeah. No, I totally get you. Listen, David, I want to do a quick fire. So I say a short statement, you give me your immediate thoughts.

**David Tisch** [1:09:40]
How is that?

### Lightning round

**Harry Stebbings** [1:09:41]
I'm long-winded. 60 seconds per one.

**David Tisch** [1:09:44]
Let's go.

**Harry Stebbings** [1:09:45]
I'm going to set a timer. You can choose one seed fund, one Series A, and one growth fund to be an LP in. Which one?

**David Tisch** [1:09:57]
I think Y Combinator has invented the only product in our industry. And I think for all the people that say anything, you know, critical about them, it's probably just rooted in some version of jealousy. I think what they've built is a world-class brand, a world-class attractor of great talent, and I think run the best business model in our whole industry.

So seed fund, like YC.

**Harry Stebbings** [1:10:25]
Series A.

**David Tisch** [1:10:26]
I think there are five to seven equally impressive, like, multi-stage firms that just

continue to find themselves in the best companies. You can choose Benchmark. You can choose Sequoia. I think the machine Andreessen's built. I think what Thrive has done. You know, what Lea Fixel does in addition is fascinating and off the radar in an interesting way and sometimes is a great Series A investor.

So I think, you know, I think what Rivet has built over the years, if you look at what they've done, is incredible. And so I don't think, like, and then you have Founders Fund, which operates in their own world and is incredible.

And I think, you know, we said Keith, Keith Acosla has done generational-level investing. So I actually don't think it's Series A. It's easy to isolate because you're looking at this combination, if you put your LP hat on, of, like, fund size, accessing early-stage versus growth, these blended products.

And I don't think it's a black-and-white answer. Like, I think the two funds that were just very narrow-focused for Series A over a historical period were USV and Benchmark. And I think they've changed their fund size today, but not really the partnership dynamic.

**Harry Stebbings** [1:11:47]
Yeah. Absurd punting there.

**David Tisch** [1:11:49]
Yeah. I weaved in and out of your forced question.

**Harry Stebbings** [1:11:53]
Growth fund, you got one growth fund.

**David Tisch** [1:11:55]
Again, like, I think they're, like, I think Spark Growth comes to mind as an amazing, slightly off the radar, just unique outlier decision-making. I think what Maritech did for a while, I think what Menlo has done, these are new, like, names in my weaving of your answer that I wanted to get in.

I think what Cotue is doing or DragonEar is doingright now, I think, are interesting.

**Harry Stebbings** [1:12:20]
You are a fucking, you're fucking Switzerland.

**David Tisch** [1:12:23]
I am Switzerland.

**Harry Stebbings** [1:12:24]
Why are you?

**David Tisch** [1:12:25]
But I'm probably forgetting, like, but I mean it. I think there's a tier, a Green Oaks,right? I could easily just say Green Oaks is the answer to your question.

**Harry Stebbings** [1:12:35]
No, because I'm asking you, I want money, dollar for dollar. Where am I going to make the most money?

**David Tisch** [1:12:41]
I think it changes in every market. Like.

**Harry Stebbings** [1:12:43]
No, but I can give you mine. YC, I agree with you for ownership. No one gets the ownership they get.

**David Tisch** [1:12:47]
But I think YC is the only differentiated product in venture.

**Harry Stebbings** [1:12:50]
And then I think Benchmark for Series A. And then I think Sequoia for Series B and beyond. That's mine.

**David Tisch** [1:12:58]
So you're discounting Sequoia's early-stage investing. I'm not.

**Harry Stebbings** [1:13:02]
I'm giving them credit from both. I'm suggesting I would rather be in YC's than Sequoia's seeds. Yes.

**David Tisch** [1:13:07]
So I think, I think the real answer to your question is you're in a period of consolidation in venture, and the best firms are going to continue to compound in every which way because they're going to access the best founders, they're going to access the best scaled LP capital, and it's going to turn into the best set of returns.

And there's going to be a haves and have-nots in venture. And I think there's probably, you know, 20 to 30 names that are competitive and probably 10 that are outliers amongst that 20 to 30.

**Harry Stebbings** [1:13:39]
What was the single most memorable founder meeting in the last 12 months? First founder meeting.

**David Tisch** [1:13:45]
Like, in our firm, my partner Greg, you know, got to spend time with Noah from Instinct early. And I think for him, that was the, like, mind-blowing initial meeting and conversation. And we were lucky enough to be part of that early round.

**Harry Stebbings** [1:14:03]
Whoo, baby. Well done.

**David Tisch** [1:14:05]
I think for me, the things we've done in the past 12 months are not mature enough yet to talk about because they're coming. And.

**Harry Stebbings** [1:14:17]
But just like, which founder did you find most mind-blowing where you were like, I left, like, wow?

**David Tisch** [1:14:22]
I have to be as excited every time I say yes. So I actually, I don't operate like that. I operate like this. And if something rises above this, you lean in. And if something doesn't, you lean out. And so I view my job as a continuum of, like, steadiness in order to make theright decisions.

And so it's not, I think what to this point satisfies me the most to answer your question is, like, the relationship that comes out of it. Do you click with a early stage? Like, we funded this 22-year-old who's building a game that's going to release in, like, two months.

Like, a single game. Level of difficulty, $1 trillion,right? To win a game business. But, like, he has been thinking about this game for a long, long time. And we're going to see if it, like, hits. And if it hits, it's going to be awesome.

But, like, low probability of market, all these factors are negative, but he's awesome. And then I met this woman who's building this really cool piece of hardware that goes in, like, your home. It's a point solution that's, like, huge market.

Everybody has a need for this. But, like, again, level of difficulty, impossible. And then you meet, like, veteran founders who are building a foundational model for, you know, a physical world application. And you're like, well, that's crazy. And you guys seem, like, totally theright people to do this.

And then you have someone in science who's doing something. So I really do believe you have to be excited about everybody in some form equally. Who do I like hanging out with? I, like, I like, I'm a consumer mindset.

I find the consumer founders the most interesting because they're nuts. Because they're going after the biggest, most confusing end user. And I think, you know, that's, like, I learned from them. We're an early investor in a company called Triumph.

I think spending time with Jake is, like, an amazing, I love talking to him. I love hearing about what they're doing. I think they'll start making a lot of noise in the coming year and sort of be one of those haves.

**Harry Stebbings** [1:16:45]
What are you most excited about in the next 10 years?

**David Tisch** [1:16:47]
I think seeing this play out,right? Like, where are we going? Where is the world going? It's, like, such a curious uncertaintyright now. And, like, that's what makes this job a special opportunity is you get to meet the people who are going to answer that question and get to be part of their journey.

I don't know.

**Harry Stebbings** [1:17:13]
What is certain in the next five to ten years?

**David Tisch** [1:17:16]
What should be, like, autonomous driving. That should be. Like, it irritates me that it's not today. Like, it would save lives. It would save, it would. Like, the data on autonomous driving would save hundreds of thousands of lives worldwide if we just mandated it.

But yet, like, freedom and all these other factors go into holding that back. But the technology is a solved thing.

**Harry Stebbings** [1:17:47]
Well, I mean, I'm not being...

**David Tisch** [1:17:48]
I think it's exciting.

**Harry Stebbings** [1:17:49]
The technology is not, like, quite a solved thing for ambiguous cities, for challenging weather conditions.

**David Tisch** [1:17:55]
It's pretty solved. It's pretty solved. Like, from a, like, a safety profile perspective, it's pretty solved. It's not perfect, but pretty solved. Like, if I told you pretty solved equals decrease of 80% of the deaths that automobiles cause, pretty solved.

But freedom, like, I don't like that as a society, we don't adopt future things because we hold on to the wrong establishments.

**Harry Stebbings** [1:18:25]
Well, it's because incentive design is skewed in a lot of frameworks and there are existing companies.

**David Tisch** [1:18:31]
I think modernizing society long-term is theright way to think. I think, like...

**Harry Stebbings** [1:18:39]
And you know what you know, I agree with you. And I think it's kind of like the roll-up play versus an entirely new company play. I think it's much easier to create an incredible AI-first school from nothing than try and incentivize innovation in stale architectures.

**David Tisch** [1:18:55]
Or would you do both?

**Harry Stebbings** [1:18:57]
No, you can try both, but it's much easier to do the first.

**David Tisch** [1:19:00]
Just move forward,right? And I think, I think, like, the politics, the social dynamics, the economic dynamics of all of the challenges in the world would be best served with, like, practical decision-making than charged decision-making. And that, I hope, is where we find ourselves over time.

Because if you end up in the age of abundance, I think it's important to figure out, like, how does that benefit everybody and not just a few? And I think technology generally is an equalizer and a positive force.

And I think, hopefully, AI can move in ways that impact health, impact science, impact every industry such that it benefits a global population

in, you know, great ways.

**Harry Stebbings** [1:19:59]
Dude, I think this was probably the most low-friction conversation we've had. There wasn't, like, a dramatic fight.

**David Tisch** [1:20:05]
Should we fight at the end?

**Harry Stebbings** [1:20:06]
Well, I don't know. I feel like we should at least try. Yeah.

**David Tisch** [1:20:09]
We fought over you deciding Benchmark to be a Seed Fund.

**Harry Stebbings** [1:20:13]
It was the most nerdy venture fight. We fought about ownership versus diversification in portfolios. You're like, allright, guys, calm down. Dude, I love chatting to you. I have so much, regardless of me being wrong, I have so much respect for the business that you've built.

**David Tisch** [1:20:29]
Thanks for having me.

**Harry Stebbings** [1:20:30]
No, dude. Not at all.

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