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Back to 20VC: David Tisch on Why High Ownership and Concentration is BS | Why No Manager Actually Wants to Stay Small | Why Competing with the Mega Platforms is a Losing Game | Why the Lean Startup is a Fake?, with David Tisch.

Why Does David Tisch Think High Ownership at Seed Is Overrated?

David Tisch says trying to buy 10 to 20 percent of a true outlier in the seed round, and beat the best venture firms to do it, is a bet he has never understood. Those firms spent decades building what they stand for, and founders already want them in the deal. Since COVID they are more concentrated on seed, more accessible, and more efficient, and founders know how to reach them. A competitive early round that used to draw 3 to 5 term sheets can now draw 10 to 15.

The claim that a concentrated manager wins 90 percent of the deals they want is, in his view, total BS. The real rate is about 20 percent. A fund that needs 30 companies at 10 percent ownership has to offer that deal to 120 or 150 companies to fill those 30. Owning 10 percent of 30 names does not mean those were the 30 the firm most wanted. The best companies do not always make it into that portfolio. Wider checks are how Box Group gets into more of the companies it is actually excited about.

Transcript

20VC: David Tisch on Why High Ownership and Concentration is BS | Why No Manager Actually Wants to Stay Small | Why Competing with the Mega Platforms is a Losing Game | Why the Lean Startup is a Fake? ·

The Twenty Minute VC: Venture Capital | Startup Funding | The Pitch

More from this episode

  1. Why Is Today's Venture Market Not a Repeat of 2021?David Tisch says the venture market now has nothing to do with 2021.
  2. Why Do Later Startup Rounds Dilute Founders Less?David Tisch says fast-growing companies now give up far less of the company in later rounds, so an early check gets diluted less.
  3. Is the Lean Startup Method Fake?David Tisch says the lean startup was a total fake.
  4. Why Does David Tisch Take 1 Percent Ownership?David Tisch will take a 1 percent or 2 percent stake when the founder is unbelievable and the opportunity is amazing.
  5. Why Did Box Group Stop Funding Brands?David Tisch says Box Group has stopped funding brands, and he does not think the brands are small.
  6. What Is Rogo in Finance AI?David Tisch was in the earliest round of Rogo, a company building AI for finance.
  7. Does Pro Rata Help Founders More Than Firms?David Tisch says having pro rata in the documents helps the founder more than it helps the firm.
  8. Should Seed Investors Sell When Founders Take Money Off the Table?David Tisch does not sell early, even when founders take money off the table. He works for the LPs who invest money in the firm, and his customers are founders.
  9. Why Do New Venture Managers Outgrow a Small Fund?David Tisch says new venture managers do not plan to stay with a small fund. Very few people get into venture wanting to keep doing the same thing.
  10. Why Does David Tisch Ban Negativity in Seed Decisions?David Tisch bars negativity when his firm decides on early stage deals.
  11. Why Is Y Combinator Different From Every Other Venture Firm?David Tisch says Y Combinator is the only differentiated product in venture because no one else gets the ownership Y Combinator gets.

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