VCs invest in startups and founders, but that doesn’t necessarily mean they always provide the support and patience that the founders need. On this week’s episode I chat with Josh Stein - Managing Partner of Threshold Ventures - about Threshold’s emphasis on how they champion their founders by supplying them with that support and giving them time to develop.

Josh is acutely aware of this need in VC because he was a founder himself before becoming a VC, so his experience has helped shape this empathic perspective!

During our chat we cover a lot… we discuss the impact of covid on operations, global fund strategies, pros/cons of blending growth & early-stage funds, dynasty funds, and advice for up & coming VCs. Enjoy!

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MPD: So welcome Josh. Thank you, right. Good to be here. Uh, so I'm going to start with doing your interview for you or your intro for you. I feel like I don't want to leave you with too much time to burn telling your story so we can get into some more complicated conversation. Um, so, and also I can brag about you a little bit and why you probably will.

Uh, so for those who don't know, Josh Stein is the co-founder and co managing partner of threshold ventures, which is the institution in Silicon Valley. He's had a traditional VC career path when it goes super well. That's the right way to describe it. I think so Dartmouth, undergrad, Stanford business school, BCG, Microsoft, numerous startups.

And then he landed at GE DFJ too many moons ago. Uh, and that's where our cross, our paths actually crossed. Uh, when we were at DFJ, I was a young VC and Josh would swoop into New York for a board meeting and he would inevitably lend some wisdom to me on every visit, which I was very grateful for, uh, DFJ transformed in a threshold ventures.

And Josh has been very successful for those who don't know Josh. Aren't familiar with him. Uh, he's on the board of a bunch of major companies, investor in a bunch of major companies with the board of box investor in companies you've heard of like Charpie Len key Twilio Yammer, and the list goes on. He's just, he's an absolute veteran.

And I would say at this point, Oh gee, Silicon Valley VC with a lot of wisdom to share Josh, what did I miss? 

Josh Stein: [00:03:38] That's a really nice way to say I'm old. 

MPD: [00:03:42] Well, as we were just talking about him, I'm catching up to you unfortunately too quickly. Uh, So here we go. Uh, so I want to jump in, um, and start on the VC side of the house, where I didn't want to spend a lot of time today with you, because particularly given your background before we kind of go into some VC topics, I would love to get your version of thresholds, just a baseline level set for folks, mind telling us about the firm.

Josh Stein: [00:04:05] Yeah, absolutely. So, um, so threshold, we're a early stage venture firm, um, sort of notionally based out here in California, although, you know, these days, I'm not sure location matters quite so much. Um, you know, we, uh, we try to get involved as the first institutional investor with companies. So, uh, what that means is we're typically, uh, joining as like the first board member, a lot of companies post seed funding.

Um, but you know, before, uh, before the funding becomes more sort of transactional, so we're typically leading a series, a rounds. You know, five to $15 million. Um, we'll write a check of anywhere between five and $10 million, uh, typically, initially, and then, um, we, we tend to be very active, engaged investors throughout.

So, um, you know, one of our, um, beliefs is that, uh, particularly at the early stage, when things can be, uh, influx, it really helps a lot to have at least one investor that's really kind of engaged, paying attention, kind of really, you know, immersed in the details of the company. Um, and, uh, you know, then as the company scales over time, we continue to support them over time.

So as other board members, other firms, um, come in as, as company to raise additional capital, we don't kind of step back. We tend to stay on through, you know, to IPO and, and in some cases beyond, uh, you mentioned box, I actually just stepped off, um, uh, late last year, after 14 years on that board, it's a lot of time.

So, you know, we have these kind of, yeah, these really long kind of engagements and we, you know, invested in every round. Um, all the way up to the IPO. So, you know, from, uh, when it was just, um, you know, three people, you know, all the way up through, you know, in the valuations were in the billions 

MPD: [00:05:48] folks listening, that's a little bit unusual.

I've been most VCs who are coming in, they write a check and around, maybe they have some reserves to follow it on the next, but very few funds are lifecycle funds where they're deploying capital as a primary investor all the way through. So that is that the core strategy. Do you do that for every company or is it something you do in some occasions?

Josh Stein: [00:06:10] Yeah. Uh, you know, so, so the, uh, thresholds, uh, spin out, as you mentioned, uh, of DFJ. So it was founded by a team from DFJ and we worked together for a long time. Um, I actually was a DFJ entrepreneur, so I started a company. DFJ led my series a round back in, in 99. And threshold was really formed out of kind of all of those experiences.

And one of the, um, things that we really learned about ourselves, but also about how we thought we could be most helpful to founders was. Um, this concept of not making lots of small bets and kind of spreading ourselves too thin, but really kind of being intentional about where we wanted to place our time and our money.

Right. And so, um, you know, to put it in like some numbers, like we have, uh, we have five partners, um, we will typically make, you know, call a seven, eight investments per year. Um, and we won't typically be working across the whole firm with more than, I don't know, 50 or so companies. Um, those numbers may sound large, but in, in venture terms, those are actually really pretty, pretty small.

Um, particularly these days where firms are not really big. So, um, you know, DFJ had been a much bigger firm, so it had a lot more partners and capital and, uh, strategies. And, you know, one of the things that we found is that, uh, you know, by, we felt that kind of spread us a little too thin. And so we, we really wanted to be able to focus very, very intentionally as you know, that's what we've sort of done with threshold.

You mentioned kind of the life cycle approach. You know, I think that's a benefit both to the Sounders that we work with because we're. You know, we, we want to be a kind of that trusted partner and sort of that, you know, that first call, not just beginning, but also kind of, um, over time, but also from the, you know, from the LP side of our business.

So the investors in our funds, you know, we're typically investing more than half of the capital in our funds, not in the first round, but in subsequent rounds. And so if we're doing our job well as investors, you know, we're building more con you know, conviction in which companies are the best opportunities over time.

So we think our first investment is always a bit of a leap of faith, right. Um, and, but, you know, as you, if you're investing in a company you've been working with for five or six years, you know, you have a pretty differentiated view on that opportunity. And so we find that's also a real driver of performance 

MPD: [00:08:16] for us.

Do you have an information advantage? Other, there are firms out there that take this to the extreme and they try to do every dollar into the company. They don't syndicate and yeah, they read a $5 million check in your eight, but they want to do 20 in your C and they want to be the dominant source of capital for the, for the company.

Is that the strategy here or is the strategy to continue to participate, which is very different, which means for folks who are less familiar, um, that other firms will maybe lead or meaningfully participate in future rounds. And so you'll have a diversified, uh, investor base. 

Josh Stein: [00:08:52] Yeah. So, um, you know, I think that the there's capital and there's also, you know, kind of, um, effort and time.

And so one of the things we found is, you know, you, you want to have more hands on the oars, particularly as companies scale, you know, different firms have different networks, different, um, expertise that they can bring to the table. And so, um, we think it's in the company's best interest to be able to partner with multiple investors over time.

Right. Uh, and so we sort of built our strategy to, you know, to fit around that. So we, we want to stay engaged and stay relevant all the way through we're we're often, you know, if you, if you look at a company at exit at IPO or MNA, we're, we're often other than the founders going to be the largest investor.

By ownership on the cap table, but typically pretty far down the list by, by dollars, by the time the companies have raised maybe a couple hundred million dollars or something like that. Right. Um, and so, uh, you know, I think the, the, the problem with the strategy, I think of doing, you know, every dollar in his, I think it comes at a cost, which is if you have, if your funds a couple of billion dollars, it's really hard to, you know, invest a couple million dollars and think that's going to, you know, sort of move the needle for the thought.

And so we, we want sort of every dollar to feel like it matters. And, um, it's, it's why we also don't make tiny little investments. Like we don't, um, you know, they used to call it sort of spray and pray and, and, uh, where you'd make, you know, lots of little, like, you know, 200,000 on investment, we found those just didn't, you know, $200,000, you can have a hundred acts and it's still is not that much money in dollars.

And so, um, you know, we've, we've just tried to be more, it's sort of being intentional and focused and everything we do. Interestingly, 

MPD: [00:10:23] uh, I had Ian cigarillo on the show last week and we were talking about his stra strategy at Greycroft. Um, they have a similar thing and that they deploy early stage capital and growth capital, which I think is a little different than what you're describing.

You're you're talking about continuing to participate in a meaningful way in rounds. He's talking about coming in with a $30 million check, uh, in the sea. And his comment was they actually divided the firm to two because at the growth stage, the early stage dollars didn't move the needle. So how does, how does it balance out for you guys you're doing about 50% in the first series a check is, and so the follow on dollars they're still meaningful.

Is that the concept? How does it, yeah. 

Josh Stein: [00:11:07] Yeah. I mean, I think if we're, if we're doing our job right as investors, again, from the, the investment in the LP side, if you look at the fund at the. Well, yeah, but also if you, if you look at the fund at the end and you, and you stack rank the companies by kind of outcome, in terms of the gains that were generated, you you'd ideally want to see the investment costs also follow a similar pattern, right?

So you had the most money in the best companies over time. Um, I think you also though balance that as, as investors, again, being real committed partners, we work with all of our founder. I mean, we, you you'll spend as a venture investor, you'll spend a lot of your time and a decent amount of your capital on, uh, companies that are, are not the ones that necessarily, um, go to the moon, but you want to help everyone find, you know, kind of the best outcome that they can over time.

And so, um, you know, we would, uh, we support, you know, almost every company we invest that I'd say through multiple rounds, but we also do try to concentrate the capital over time in what we think of as the most kind of compelling opportunities with the, with the multiple strategies thing. I think. I, I definitely see the pros.

I mean, you need growth, you need growth stage investors because you know, it's a different skillset, underwriting, an investment, you know, when a company has lots of data, if you have a thousand employees and a hundred million in revenue, there's a lot of data structured differently, 

MPD: [00:12:21] different everything's different.

Totally. Yeah. 

Josh Stein: [00:12:23] Yeah. Well, absolutely. Right. Um, you know, so I think there's definitely a thing for that or a need for that. Um, I think, uh, the question I would have is why be a single firm at all? Um, you know, versus why not have those as separate firms and that that's where maybe we differ with sort of some of the conventional wisdom, right?

MPD: [00:12:39] So, so at your core threshold is an early stage investment firm that meaningfully fully participates. I'm sure you, it sounds like you participate more with the companies that are doing well, that you guys invest your operational resources and your time across the board, regardless to be a good partner.

What does that mean for an entrepreneur? Let's say entrepreneur comes in, let's say they've got a hot company and they've got options. Why do they pick threshold? Why, why is, why is your money, the money that they should be grabbing. 

Josh Stein: [00:13:09] Yeah. So, you know, the, the thing that we always encourage founders to do is talk to other founders, you know, cause that's like the, you know, it's to do the references on us.

And I think what people hear pretty consistently is that, um, you know, that we're kind of the people that are the, the, the most engaged sort of most, um, active, um, with the founder. So, because we don't work with a lot of companies that allows us to really focus that time and attention. And I think that, um, you know, at the early stage, I don't think you need like a, you know, to be, if you're a founder and you've, you know, you're 10 employees or 20 plays and you're, you know, you're in that kind of scaling process, you don't really need to be working with like a dozen investors.

What you really need is I think one or two that are really kind of engaged in paying attention and, you know, those conversations tend to happen. Um, you know, pretty frequently, right. Um, as opposed to kind of in a late stage company might have a quarterly board meeting. Right. Um, you know, it's more of an organic process kind of at the earliest, taken up the phone 

MPD: [00:14:05] and coffees and.

Is that more describing, right. Less of formal board meetings and PowerPoints. And so what kind of things are they coming to you for? Is there a pattern or it's just all the typical operational stuff that comes up from HR to sales strategies? Is it all, or is there a thing you guys specialize in that you want everyone to know about?

Josh Stein: [00:14:26] Um, I, I think for us it's kind of everything, but one of the things we tried to do with our team is also have different skillsets among the partners. So for example, at threshold, I tend to focus on the go-to-market side and I'm on the sales and marketing. And so I'll, you know, there's companies where I lead the investment for the firm, but then I'll also work with founders where I'm not the lead partner, but I'm helping them with their go to market.

Um, one of my partners, Heidi Roizen is probably one of the most experienced board members, um, in Silicon Valley. Right. And so she has kind of that perspective. My partner, Emily Melton, uh, is one of the deepest in healthcare and healthcare tech in terms of that, any structure, it's just something we've been very, you know, about half of our portfolios.

Related to healthcare tech in one way or another. Cause it's just the massive market undergoing huge transition right now. There's kind of incredible opportunities there. And so we try to really kind of, um, you know, have different skill sets within the partnership. One benefit of having a small team in a small portfolio is also that all of our partners can know all of the companies and vice versa.

Right. So, you know, um, I, when I was a founder, I worked with a number of firms, you know, they would typically have a hundred to 200 portfolio companies or, or more right. And it wouldn't be uncommon for me to run into like a GP at one of those firms at an event. And they, you know, they'd invested, you know, 10 or $15 million in company, but they, they would have no idea who I was.

And, and that always struck me as kind of strange. And so, you know, we try to have more of this kind of, um, you know, there there's a cost to scale, right? Um, on the, on the investing side. So our, our strategy venture, our strategy is it. I would argue it's it fundamentally doesn't scale. Um, which is ironic because we're looking for companies at scale, but, but we're okay with that.

We've kind of said, you know, um, to do what we do and to do it well, you know, it's, it's not something that, you know, we're never going to be the biggest. We just want to be the best, 

MPD: [00:16:09] really focused on generating returns, multiples and having positive impact of the entrepreneurs. 

Josh Stein: [00:16:15] And I'd really stress the ladder.

I mean, I think that the returns come, like if you, if you, if you pick interesting opportunities and good people to work with, and if you apply, you know, the right effort, I think the returns come. I think that the kind of joy we take in the business is really working with the founders and, and at least, you know, um, I'll speak for myself.

I mean, that, that's really, when I look back, as you kindly pointed out on, uh, you know, a lot of years, um, you know, it's not the, it's not the numbers that, you know, get me excited. It's like the, you know, having worked with founders and watching them build this out resonates, 

MPD: [00:16:49] I mean, you're an entrepreneur.

Right. Like, you've been doing stuff on the operating side before he didn't come at this directly from consulting with only consulting background. So I understand why your DNA. 

Josh Stein: [00:17:02] I wouldn't say I was like a great founder or anything, but, uh, you know, I, I think I was a better investment as a founder, but the, I think I going to be really hard to be a venture investor without having spent some time at a startup.

I it's, it's possible for sure. Like, there are definitely people who, if you start really early in venture and you, you know, you're going, you're meeting lots of founders, you're going to not support me. And so I think you can absolutely pick that up, but the, um, you know, I think coming like right for like banking or consulting would be, it would be really not a great idea.

Um, you know, you'd ask what kind of the, the sort of, um, types of, you know, one, one thing that's really interesting venture is, um, you know, the founders are always going to be much deeper in the technologies and the industries and the companies than they were like when I was running, you know, my company is like, you know, you're you eat and you wake up and you know, your, this, all your thing, that is the one company.

As an introvert or you're kind of your broader, but you're also shallower, but the interesting, those two perspectives go really well. So, um, you know, like if, uh, let's say the VP of sales quits, right, right. Um, that may be the first time that that found is probably the first time that founder has dealt with that.

I've seen that half a dozen times and each situation is different, but I can sit down and funder and say, look, okay, I've seen this before. Like, here's kind of what we did at these things. And here's what works. And by the way, you can call, you know, you call Aaron at box and, you know, ask him how he handled it, you know, this kind of thing.

And that, that I think tends to be the kind of really helpful value add that we can bring. But I think, um, also recognizing that it's not that we have like better information at all. It's just, it's a different perspective. It's like, you know, as an investor, you're kind of the shallow and wide versus the really deepened.

MPD: [00:18:36] appreciate the humility in that. I feel like when I first started out in venture, I think the misperception I had when I didn't counter a lot of other young investors that a lot of folks had. Was that they thought because people are asking them for money and I'm being very nice to them that there was an assumption that they actually knew more.

I think it's very rare for a VC to know more about an industry than the entrepreneur. Very rare. 

Josh Stein: [00:18:58] Um, but the, Oh, I, I, I, I think, I mean, if that's the case, then you know that that's probably 

MPD: [00:19:04] a problem. It's the pattern matching and general operating skills that I think apply. So when you've talked about, let me, let me take this a different direction for a second.

You've got a very unique strategy. Um, in that you're very focused on very few things. As you've mentioned, it's not super scalable. Um, and I, I go on a tangent here for a second. I think one of the limiting factors in scaling venture funds is board seats. We can talk about that if you're interested, but what I look at this, um, it sounds a lot different than the iteration of the firm before.

Do you want to talk about how the strategies evolve from back when it was, you know, I know it's awhile ago now when it was DFJ. Uh, and what you learned from that and why you've taken this current. 

Josh Stein: [00:19:50] Yeah, I mean, I think, um, you know, I think the, you know, DFJ, uh, I think, you know, really had a vision of kind of, you know, applying, they, they, you know, they've done really well for themselves.

MPD: [00:20:02] I think it would be helpful to maybe start with an overview of DFJ. I bet you, uh, Oh, sure. Not everyone knows the scope and scale of the firm, which was, yeah. 

Josh Stein: [00:20:12] Yeah. So, so do you have to, it was founded by Tim Draper in 1985, uh, when he was real young guy and Tim is a legendary investor, you know, huge personality, very bold thinker, you know, uh, you know, like bought, you know, $20 million of Bitcoin at 600 bucks a Bitcoin, you know, with his own money for it.

Yeah. I mean, that's a, that's a pretty spectacular that, um, you know, but that's pretty typical, Tim, right? He means he's, he's bold. He's sort of fearless. Um, you know, and, and he's also. You know, kind of like, you know, he'll climb one Hill and then he wants to climb a bigger Hill and bigger and bigger. And, you know, he he'd been very, very successful.

Uh, uh, and you know, I think he has his vision was to sort of bring venture capital, um, globally to, you know, kind of every corner of the world and in every sector. And I think I completely agree with the idea that, you know, there's, there's entrepreneurs everywhere and opportunities everywhere. I think, um, at least, you know, my observation was that the, the executing that operationally was challenging and, um, that, uh, the things were lost in terms of the ability to really work closely with the entrepreneurs.

When you have 400 portfolio companies, as the managing partner, it's really hard to even know what all four of those and he's do. Right. Um, and so it's not that that strategy was, was right or wrong. It's just, there was a group of us that said we really want to go back to kind of being able to work really closely with the companies and not have, you know, the partner meetings be, you know, kind of all day, Monday where we're kind of covering the whole empire.

And, um, you know, we kind of. Took the venture part of the business and sort of extracted it and the U S venture part and kind of focus that, um, the, the growth stage, uh, investing team DFJ growth, which is, um, still active, which is a fabulous, Oh, very active. I mean, they're one of the, one of the best growth seizures out there.

They absolutely crushed it. Um, you know, uh, they, they, uh, had always operated pretty independently and, and we, you know, we're still very familiar, but we kind of said, you know, look, if they're, doesn't really make sense for us to be a single firm, like it's, you know, we should, we should be kind of affiliated, but not, not this kind of pipeline.

Um, and, um, yeah. And so, you know, we, we, we sort of, um, uh, kind of spun out the firm in 2013, 2014 and, um, have been sort of threshold threshold since the, the name threshold is newer than that. We, we spend it out initially as DFJ venture, which was sort of a. Uh, small, you have a smaller sort of change. Yeah.

Like a half, three grand, and then we, and then we kind of decided to do this. Yeah. So you shifted, so you've, 

MPD: [00:22:39] you've been operating under the new playbook for about a decade. Yeah. 

Josh Stein: [00:22:43] Yeah. Oh God, that didn't play. I didn't think of it that way, but you're right. You're welcome. You're welcome. Thank you. Yeah. 

MPD: [00:22:49] Okay.

So, but just for people listening, just a little clarity, I mean the DFJ, uh, network at the back of that, when I joined, which was Oh six, I worked with the East coast. Satellite was sprawling. I mean, I believe there was 150 GPS, I believe it was the second or first or second largest firm by deals invested per year in the world.


Josh Stein: [00:23:12] I think it was most years the largest normally be a few. Yeah. It was an artist. It was, I don't think it was, you know, there are firms that are bigger now, right? Like if you think about like a, like a Sequoia, for example, like, you know, they, you know, they have offices in India and China and growth and early stage there's, there's a lot of different strategies and people.

Um, but yeah, it was, it was really, really big. 

MPD: [00:23:32] And the DOJ approach to it back then, if I remember correctly was a bit of a franchise model to find a local partnership partner up with them, bring access to capital and knowledge about the industry ad platform value and implement the network. That way that's different than what we're seeing Sequoia and other firms do with their global offices, I think.

Is, is that right? Or is it, are you seeing, as it feels like that Tim was a trendsetter, right? He, he broke new ground and trying to be global about venture, which I think has come to fruition. Um, it's becoming reality if you're looking around at what's happening in innovation front now. Um, but when I look at the model, did the model persist or did people take it a different, take a different path as they looked at global expansion?

Uh, well, you know,  or building proprietary. Funds and other times 

Josh Stein: [00:24:24] it's more nuanced than that. Right. But it's, you know, so the, the question would be like, you know, do you raise the capital from a single, like in a single process, uh, set of LPs, you know, who, who makes the decisions ultimately, right? Like, do you have like a, kind of a, like a senior set of partners at the global level that have maybe like an override authority that you mean, but just, it would be like, I think you see this just in general in business, which is, there's so many ways that initial first idea, and the first iteration is sort of directionally.

Right. But not perfect. And then it gets iterate, iterate. So you have like answer, right. And then MySpace, and then finally Facebook. Right. I'm sure there'll be, you know, something after that. Um, you know, I would, I would argue that, you know, DFJ is model was kind of yeah. The idea of going global and having all these offices and all these GPS, this was just like thought of as crazy in industry.

And if you look at it now, that's where a lot of the biggest, you know, firms are. And I think they've taken their own twists on it and evolved it. And I think they're probably, I've never seen by the way, the venture industry in more transition and flux, it is right now, like the, everything is changing so dramatically.

Um, uh, but I think that, um, you know, I think it's, it's not exactly the same as the way the DFJ was, but all that said, I think, you know, we still believe that, you know, being focused. I, I think there's, it's arguable that there's an overhead that comes with managing scale and there's, there's pros that come with that.

And I think when we, um, with most of the companies work with will ultimately raise capital from one of the, you know, call it platform funds over time. And I think actually our model works extremely well with them because we're a small fund size, um, which we do very intentionally. Um, you know, we, we may own 15% of a company or something, but, but when they're raising $200 million, we're not going to write a $30 million Parata check.

And so we're not kind of crowding out. You know, um, the, the platform funds there. So we actually, it's easier for us to co-invest or for a platform to go invest with us than it is with another platform fund where they're both looking to, you know, kind of do super pro-rata and jamming as much capital as 

MPD: [00:26:22] possible.

Right. So you've got the early stage guys. You've got the growth guys. You've got the firms that do both under one roof and you've got the firms, I believe like Foundry, where they try to do every dollar in the company, very different models, very different approaches. Um, jury's out, I think on which works and probably, uh, probably the jury's out on which works for which GPS is, if you can get the bets right at the early stage, I bet you, every dollar is a great way to go, but it's hard to do.


Josh Stein: [00:26:49] uh, you know, I, I, I think I'll probably all the model. I think you nailed it, which is for which GP. I mean, I think it's really dependent on the personalities of the people. Um, although, you know, one thing, if you look at like private equity, right, um, you know, or hedge funds, as they became much bigger motion institutionalized, I'd argue, they became much less about the personalities of the people.

Um, and they became, you know, more like corporations themselves. And I think some venture firms are starting to look like that, I think. Um, but I think, you know, what, what we do and sort of the roots of the industry are more in these sort of, you know, you really have at the end of the day, you know, five to 10 kind of people that are sort of making the decisions at most of the funds historically.

Um, I think there's a lot of pros that come with that in terms of, you know, being able to be nimble, being able to, uh, you know, there's, there's a lot of, uh, leaps of faith and kind of intuition in venture, right? So there's, you know, um, things like COVID happen. Right. And, you know, you have to kind of, you know, really kind of sit down and go through the portfolio and say, okay, what are we going to do about this?

And what's our perspective. And some companies may be we're fundraising right in the middle of that. And you know, the processes, just the other markets are shuts down for a little bit, but they need capital. So you've got to sort of step in like on an emergency basis. I think being able to be small and nimble really helps there in a way that it would be harder if you were bigger and institutional.

So let's 

MPD: [00:28:02] take a different tact with the same conversation. Um, I know when, uh, during the transition, even before you guys spun out, uh, and became threshold, you had major fundraising responsibilities for the firm. If I'm not mistaken, how was it? What did you learn and how has it differed raising for a large platform fund to use your language versus more of a boutique size font?

I don't know how much money do you guys manage now? What's the current fund size? 

Josh Stein: [00:28:30] So we typically are like in the two to 300 million range per fund. Um, we're about, uh, eight, 800 million of AUM. Fantastic. 

MPD: [00:28:40] So for that size firm, I'm sure it's a lot different in the way you're presenting it in the conversations.

How does it change for fundraising is one easier than the other? Have you seen any major on the LP side? And the reason I ask is probably a lot of, uh, early VCs are gonna be listening to this for the people who were coming up, what should they be hearing and learning. 

Josh Stein: [00:29:01] Oh, I mean, there's thunder is it's a whole whole thing.

Um, uh, I think, um, uh, I don't no one's necessarily harder than the other. I think you're talking to different investors. Um, one, one thing that we've had to deal with a little bit is, um, you know, some of our investors, the limited partners have gotten, you know, when they started working with us 10 years ago, there were certain size.

Now they're, they're much bigger because the market's been huge and a lot of capital's going in. And, um, you know, so, uh, as they've scaled, like it's kind of the, the problem with particularly the big platform funds, like they have to, we can only take so much capital per LP and, um, that might've been 1% of their assets 10 years ago now it's, you know, a quarter of a percent.


MPD: [00:29:40] so, uh, those institutions sized out for you. Like they're too big now and you've gone to smaller institutions that are more appropriate or did they, do they like the fact that they get more diversification, they can invest funds. 

Josh Stein: [00:29:56] Yeah, gen generally, we've managed to hang on to those folks, but it's kind of a constant tension at some point, you know, you can sort of see that that's going to be an issue, but are going to do is look let's, I re as respectful as I am of that constraint in that problem for you, like our strategy works with this amount of capital that we're trying to make.

So that's what we're. Yeah. And, and, and we think that if we took more capital, um, I don't know that it would, uh, you know, I believe that at least the way we're currently configured it would, it would make less results for them. Um, I don't know that there's one perfect solution and venture. I think there's lots of different ways to solve the problem.

I know, you know, for us that this is, this is the way that we like to work. And, and it, I think we've shown that it's both effective, but also, um, you know, for us, it's personally rewarding, right. And lets us kind of work. 

MPD: [00:30:43] What would be a tip? You could give folks listening who are maybe on their first or second fund early in the process.

You're a veteran fundraiser, who's done it in a bunch of different ways. You've had the opportunity to pitch institutional LPs. A lot of the folks who are working through family offices are not that level yet or ever. Um, any, any words of wisdom for the folks who are learning and kind of coming up because, you know, the next generation is being groomed right now.

Josh Stein: [00:31:10] Um, probably the biggest one would be it's it's a long, these are long relationships and you have to be, I think, respectful of the fact that so with most venture funds, limited partners are committing effectively to a blind pool where they're going to have no ability. They have no say over decision making of how that capital's invested.

They have no ability to withdraw their capital. Um, really there it's a huge leap of faith on their part. And those funds are typically 10 years with extensions. And realistically, most venture funds have gone significantly beyond 10 years. Um, you know, if you put yourself in their shoes, like that's, that's a big leap.

And so I think it takes time to build those relationships. I don't think that it's a, I think that, um, it makes the. Fundraising for companies, which I think is from a founder sampling often be painful, feels like long distraction. Um, you know, it makes that look like kind of a cakewalk in some way. So I think, you know, typically we've had relationships with LPs that go back, you know, multiple years where we've been talking to them and sort of explaining our strategy and kind of talking about, you know, the companies we think are interested in our views, on the markets in the world, and you sort of, you build credibility through those conversations.

And then I think when ultimately then they choose to invest. It's because they know you and they have a conviction in sort of like, you know, you, you do what you say you're going to do. And, and you know, that you're more right than you are wrong. And the things that you say, um, I think that, you know, having the, the patients, um, to build those relationships over time and not being in as much of a rush is, is really helpful.

MPD: [00:32:37] How long has it been? One thing I think is interesting over time is that we're talking six months or six years. What's what, what should people expect if you were coming up to this. 

Josh Stein: [00:32:44] So I think it depends on the types of investors. So I think with, um, there are some investors that are funds themselves, um, like fund to funds and some of our most thoughtful LPs are, are, are those like they, cause they, they work with, you know, their, their managers themselves, they, they work with lots of, uh, venture investors, uh, like the folks at top tier, for example, in San Francisco, I've been long time supporters us they're super engaged.

They're probably more willing to take a risk on somebody that they've known for maybe six months or something like that. Um, and then there's, you know, uh, like pension funds and family offices where it might be longer, right. Or, or endowments where they might want to watch you for a couple of fun cycles.

And so I think, you know, you, you have to kind of time your approach to the type of LP and understand sort of where they're coming from. But I think, you know, L LPs in general, um, you know, I think the, the, uh, the way a lot of them are compensated and rewarded, if they don't necessarily get. As many accolades for the picking well is they do take risk on picking poorly.

So, um, you know, they tend to be a little bit more risk averse and I think just sort of being kind of empathetic about where they're coming from and helping them, uh, even just showing that you're you understand where they're coming from, you're being respectful of that. I think goes a long way. Uh, 

MPD: [00:34:00] how can, you know, kind of fun strategy or messaging be packaged to recognize their perspective?

What are the things you're, when you say you want to be empathetic to, um, uh, built a built-in propensity for risk aversion, how do you play Cate that for them you talk about downside scenarios. Is there, is there some slide you use? What's the piece that illuminates that understanding? 

Josh Stein: [00:34:24] Um, I think that, uh, you know, the, the InVenture, at least in my experience, the sins, uh, from, from the, from where I said is sort of the GP side, the sins of omission are more than the sense of commission, right?

So it's like the deals that you. That you didn't do, or the, you know, uh, having distributed or sold companies too early has cost us way more money than the company than the best we'd make, where the companies, you know, failed, for example. Um, I think, um, with that said, uh, so you could argue, Hey, it's all about the winners and the upside and sort of, you know, um, you know, just sort of go for it.

And, you know, if you, if you don't make it, you sort of die on the beach and move on to the next thing. Um, I think, uh, you know, that's not really how LPs thinks. So I think with LPs and I think they have a point, you know, you want to talk about, you know, risk mitigation and how you think about, you know, having, you know, kind of controls and how you think about, um, recovering partial CA you know, it's a lot of GPS, like, I can't be, I've invested $10 million.

I don't really care if it's zero or five, you know, that I get back. If I'm playing all for the a hundred pluses and that's, that's the right strategy in some ways, I don't think that's actually a great message. Either LPs or interested in the, the founders, because if I'm a founder, I'm thinking, okay, well, So you're saying if I'm not a 10 X for you, you don't care, like, right.

That's not great. Either my founder, I've got a portfolio of one. Right. And so, um, so I think on both sides, you know, just kind of being a little bit more thoughtful about, you know, okay, how are we going to, um, I, I would argue most good GPS spend probably more time, um, with companies that are ultimately, you know, kind of marginally successful, or maybe don't even return capital and finding the know good outcomes for those relatively good episodes companies than they do on, on making the best companies even greater.

Because the companies that are just going to go into the moon are, are sort of going to the moon, right. You're sort of along for the ride. Um, I think you build a lot of your reputation actually with how you handle your investments that struggle. And can you help them find, you know, some kind of, um, you know, respectful, you know, relatively good outcome.

MPD: [00:36:26] Um, there are VC sages out there that will say, Hey, that's not where you should be spending your time. You should be spending time trying to help maximize the upside on the big ones or there's, there's some conventional wisdom that floats around VC that the dogs take all the time. And they're the, the subtext to that is that's not where you're supposed to spend your time.

If you're ruthlessly focusing on returns. 

Josh Stein: [00:36:52] I mean, at some level they're not, they're not wrong, but they're, but they are right. I mean, it's, um, you know, I think if, if you're a founder, do you, um, you know, you know, have, I don't know, like, I, I, I think having somebody who's just utterly ruthless as my partner, especially when it's my only maybe investor partner, not such a great idea, you know?

Um, uh, I also think it's shortsighted. I think people kind of fool themselves, like, you know, like that, that you can even sort of know. I mean, the number of the companies have been most successful that I've sort of seen as an investor. You know, the path to success was rarely kind of a straight, you know, curve up into the right.

I mean, there were little bumps along the way, and I think it's being able to really kind of pay attention and support companies through those bumps that, um, makes a huge difference. Um, one of my companies that's doing best right now that the founder, um, had, uh, early on, had a tough month and she, um, uh, you know, kind of came into it was really concerned about it.

And I, I said to her, look, you know, when, if a couple of years you're gonna look back and like, when you look at the graph on revenue, you're not even gonna see this, but like, it's like, you know, the scale is going to have changed so much on the Y axis. Like, it's, it seems like a big deal. Now, trust me, like, you're not even gonna notice this thing.

Um, and I think like, that's, you know, that, I know that made a she's she's mentioned to me in overtime, it's like that like kind of helped her sort of just contextualize and, and, you know, kind of relaxed a little bit. Um, but I think it's, it's true. And I think, you know, if you, um, the problem with being like ruthless.

And sort of, you know, always optimizing it's like you're an actually optimize yourself out of a lot of successful outcomes. And I think you're also gonna piss off a lot of people along the way, 

MPD: [00:38:33] hearing everything you're describing, it sounds like the whole strategy, the approach, the perspective is all hindering and centralized around empathy in a way that you don't usually hear from business.

People let alone in a most of the VC community. Sounds like you're taking an empathy towards understanding the LPs and empathy towards understanding the entrepreneurs. And I'm actually gone. The making made some hard decisions to forgo, scalability, to actually construct your model to service the entrepreneurs you're investing in rather than just capitalize on them.

And it's lovely. I think it's something we don't 

Josh Stein: [00:39:11] well, it's a cool way to put it. I mean, , 

MPD: [00:39:15] I think it's a subtext of this whole story. I mean, I think if we're going to put a title on this thing, it's going to be. Empathic. See, that's where I think this is going 

Josh Stein: [00:39:23] well. I'm not sure I'd put myself in that. I mean, I appreciate that.

The, uh, I mean, it's yeah. I mean, it sounds a little, maybe I've I've, uh, you know, I mean, we're, we're doing also bees 

MPD: [00:39:34] and flowers in my interpretation of this. Tell me, well, I think it's, 

Josh Stein: [00:39:38] it's also, it's what it's, you know, what makes us want to do this and get out of, you know, ventures along holidays? You know what I mean?

Did the 17, 17 years, you know? Yeah. Like I got another 10 or 15 in front of me, I think. I mean, so it's, it's, you know, and you work with companies for 10, 10 plus years easily. So, um, you know, you gotta like, like founders means you gotta want to kind of, we have a much easier, I think, role than founders too, from a kind of emotional toll and stress standpoint.

Uh, but I think you still have to want to get up every day and do it. And, um, you know, so for us, it's, we've really built the strategy around what, what gets us out of bed and what makes us excited. And also, I think it's, what do we think is going to generate the best returns? One thing about scale is we're.

There are definitely, I definitely think there are strategies we could follow that would make more absolute dollars of gain than what we're doing. But I think we care a lot about relative about performance. So for us, it's, it's knowing that we've delivered superior returns to our investors, not just, you know, like I'd rather make a, you know, a five X on two or 300 million than I would make, you know, two X on 2 billion, even though the latter would be more dollars, 

MPD: [00:40:41] right.

There are people who definitely choose the latter because they are optimizing for that. And there's nothing wrong with it. It's just a different strategy. 

Josh Stein: [00:40:48] It's different 

MPD: [00:40:48] strategy, but here's the thing, the core of the strategy in these firms is a little bit like a fingerprint, right? You've, you've built a job for yourself that you want to do.

You're talking about getting out of bed and you're talking about constructing a low quality of life, where you're working with a certain number of companies where it's reasonable and you're connected, and you have an emotional connection to human connection. When I look at these firms where you know, now that I've been in the business for going on 15 years, you start to see about you start to see transition planning, and you're someone who's actually lived through it.

Where the firm has gone from, um, you know, uh, one group to another, uh, and it's basically a dynasty, right? The, uh, threshold has survived through a long period. Um, you know, I guess all in probably close to 30 years at this point, right. Do you think that's the right mechanism for firms or should firms live and die with a certain set of partners, right?

Like when you and your current partners are done, should you close the doors and let the people who want to go on reform their own operation or cause it, it sounds like so tailored to your interests and your personal perspective. 

Josh Stein: [00:41:58] I think it's a great point. I mean, I think, I think we all like to see the things that we've built continue beyond us.

Uh, but I also think you're nailing it, which is, I think it has to be the way that the people who are carrying that flag forward want it to be, and I think that's part of the, the natural evolution I give. You know, Tim and, and John Fischer, immense credit for, uh, you know, letting us, uh, you know, kind of remake the firm in a way that worked for what we wanted to do, which was different than I think what got them excited.

And I think that's what enabled that transition to be successful. I think there are definitely lots of firms where it hasn't, it hasn't worked. Um, and I think you have to kind of let each generation kind of remake things where it is also the world's not static, right? I mean, the, the, you know, the markets are different.

The technologies are different. The founder's different. Um, 

MPD: [00:42:44] when I started there was wasn't there. 

Josh Stein: [00:42:48] We have. So within, within our current portfolio, we have half a dozen companies that are North of a hundred million in revenue. We have, you know, private companies that have hundreds of like many hundreds of millions in revenue.

I there's. One of our companies, uh, generated North of 20 million of EBITDA on free cashflow in a quarter, in a quarter, right last quarter. I mean like th like these are, these are, these would be like companies that were, you know, years post public when I joined, um, uh, in, in 2004. And so like the, it's just a totally different, totally different world than it was before.

And, you know, we're seeing all these new innovations like SPACs right. Um, I was actually just talking with one of the major investments this morning about like, you know, with, with the companies are getting so big now that the range of financing options that become available, like, if you're that cash generative, the range of options of what, like a bank could structure for you in terms of financing really open up significantly.

Right. And so, um, you know, it, it's, it's just fascinating to watch this kind of evolution. Um, it feels like 

MPD: [00:43:48] in an era where, you know, PE and VC used to be, there was a, there was a Chinese wall, it was an iron curtain between the two. They never overlapped. It feels like there's now increasingly increasing integration of the VC portfolio goes into the financial ecosystem, the broader ecosystem there's moments where they're taking out clever debt structures, or we never used to see venture back companies doing that was really uncommon.

And now that's, you know, you have companies like compass, which are essentially would be private equity firms, you know, private equity backed roll-ups out doing that under a venture flag. Um, what, in your perspective, how has, you know, the last year or so changed the game? Cause you mentioned there's a lot of shifts that have happened over the last decade.

Obviously the last year has been very momentous in so many ways. What have you seen be maybe enduring shifts in the venture game that people need to be thinking about either as LPs, when they're investing entrepreneurs or upcoming VCs. 

Josh Stein: [00:44:47] So I would say I got this totally wrong in March when COVID hit, which is I think, um, you know, I, I think I, and I think a lot of folks thought that, wow, this is going to be like a recession and it coming on, I think it became pretty clear within like a month or two, that wasn't the case at all.

Um, I think, you know, COVID tech and software print in particular, really aren't going to changing the world and, and in, in every vertical market, I mean, it would be almost impossible to name a market that hasn't been, or isn't being transformed actively by technology right now. Um, COVID turned out to be a huge accelerant to that.

Right. And so like, I'll give you like an example. So, um, you know, we have, uh, we have a company in New York, um, uh, bento box, which provides SAS software for restaurants and hospitality. And when COVID hit, you know, we thought, gosh, you know, the restaurants are gonna be closed. This is going to be tough times for bento, right?

You know, uh, uh, crystal, Olivia, any the founder and her team pivoted, um, some of their product offerings towards things like, uh, the, you know, the takeout and delivery kind of options. They kept a lot of their customers alive and their business is thriving as a result. I mean, I never would have predicted the kind of growth they had last year in March.

And, and, you know, and so they're, you know, they're, they're literally like restaurants that would have had zero revenue options have now pivoted, you know, like, you know, fine dining where they would have never bothered with takeout to any significant degree. Right. You know, totally shifted. Um, you know, one of my companies, the companies in our portfolio that I work with talk desk, um, is, uh, uh, so contact center software is a cloud, you know, call center software.

Typically it's one of the, it's a huge market. It's like more than $10 billion a year. It's one of the last areas of software that really hadn't gone cloud. Um, interestingly Twilio, which was another one of our investments, sort of really enabled this kind of transformation cloud. You could see that it was going to go to the thought all software is going to go to a course of time.

But when COVID hit, you can't have an on-prem call center. Like you can't have a thousand people in a warehouse sitting shoulder. Totally. And so, you know, that one was maybe a little easier to call, but like I would say in general, you know, it, it, it almost sounds icky to say, cause I was like war profiteering or something, but I would say like COVID has forced the transformations to happen even faster in our portfolio.

And I'd say across really just the technical yellow has been, I think, largely huge net beneficiaries. You're mentioned. Look at, look at Airbnb. You mentioned, 

MPD: [00:47:06] you see, even we, we have, uh, we have a company that does, uh, sales couches, right. And they've been growing like wildfire for a long time, but not really penetrating the senior demographic with COVID.

They started seeing seniors buying on online things that just, you know, you don't, you don't see that going back afterward after people understand the convenience and are comfortable swiping your credit card. So I agree with you COVID has been good for tech, but how has it changed venture. The industry, the way we operate fun constructs, what do you think are the major shifts coming for us?

Josh Stein: [00:47:41] Yeah. So know when we talked about like us having kind of a small, tight team, one of things we really value is that, um, you know, we can talk about every company and every investment opportunity with our, with our full team. Right? So we really valued kind of our ability to have these sort of intimate conversations with our, uh, with our investment team.

Uh, you know, it, when we weren't able to meet in person, that was a challenge. So we, we really had to be thoughtful about how we kind of reinvented our internal workflows and processes. So we sort of over-indexed on, okay, we're gonna go from one, pardon me week to, to, um, you know, we have an all hands, um, uh, every Monday we have with the kind of the full team, including, uh, beyond the investment team, we do these sort of, you know, we have monthly kind of, um, activities we've, you know, heavily migrated into, you know, platforms like, uh, like Slack, for example, Uh, that sort of facilitate kind of that more kind of, uh, uh, kind of, uh, quick paced communication.

Obviously we're all spending like, you know, tons of time on zoom. Yeah. I think a lot of that's going to stick. I mean, I think, I think we're still going to want to go back to being able to sit down in a room together and kind of talk about things. So I think some of the, there are some of the interactions that happen that are, uh, you, you don't sort of shoot the shit on zoom as much as you do in person.

And, and that actually has value, right? Sometimes like that's where the really good ideas come from is when you actually can let the brain relax for a little bit. Um, and so I think we're going to have sort of that hybrid, but I also think that, like, for example, the speed of our execution in being able to make decisions up, not down, um, like the sort of the zoom effect of, you know, people don't, you don't have to like, like building commute time, like, well, I'm in San Francisco.

I got to make it down the middle of park or vice versa. Um, I actually, it's easier to get people into a meeting. Um, than it was before. And so I think we're gonna keep a lot of those innovations. For example, I didn't go 

MPD: [00:49:28] back to an office after this, or it will be like, will you be remote first? The pattern is for you guys, 

Josh Stein: [00:49:34] I think will be, I think we'll have an office, but I think we'll be pretty heavily remote.

And I think, um, it's going to be, we're going to figure out, you know, all this stuff was like, you know, the ideas were there with like Cisco telepresence and stuff, this idea that, you know, it wouldn't really matter if you were in or not believed it. I think that's, yeah, I know, but it's, it's too early, right?

It was, it was like, you know, a hundred thousand dollars for the setup or whatever. And you had to have, you know, massive internet connection, which was expensive at the time. All that. I mean, you have cellular connections now that can support that kind of bandwidth. So I think, uh, I think a lot of that stuff was just too early and I think now it's going to stick.

And I think a lot of people also, I think people would have been skeptical about, I was skeptical like, Hey, can we really do this without an office? Um, but it's, COVID sort of forced, you didn't really have an option. Right. It's either that, or pack up the rack up the shop. And so, um, but now you see it working.

I think people are like, Oh yeah, that does actually work. Like, and it's 

MPD: [00:50:28] faster as you say, you know, a lot of benefits, 

Josh Stein: [00:50:31] um, um, uh, you know, like we have, um, I, you know, people don't talk about like kind of the back office finance team in venture that much, but to the important function, you know, a lot of our finance folks would live, you know, like in the East Bay that have like, you know, an hour plus commute, you know, kind of into the office each day they've been as, or more effective as they were before and a lot.

And I think we're absolutely going to say to them, Hey, as long as you're getting your job done, better quality of life. Yeah. Yeah, totally. It's another two hours with your kids. I mean, that's, that's a no brainer. 

MPD: [00:51:02] Um, geography, I feel like it's been a catalyst for an ongoing change that maybe, um, Tim's vision had ignited at some level, a decade prior.

Right. Uh, we're seeing a lot of shifts in startup activity around the country, let alone globally. How has that affected your local community in Silicon Valley, but it, what are your expectations? What are you seeing? 

Josh Stein: [00:51:28] Well, I think the, the thing I think that I would a hundred percent agree with with Tim's vision is that there's founders all over the world.

There's opportunities all over the world and that, you know, the startups should, it should exist in every country, every geography targeting every market. The thing I would question is why am I the investor to, to, to be the right investor for those companies? So I feel like I understand the U S I understand I actually have target global markets as a us company.

Um, but like, I, I understand that, or at least I believe that my, my networks and my knowledge are finite. And, you know, like if you take China as an example, you know, um, I don't believe that I would be an effective investor investing in Chinese companies with Chinese founders, because I don't understand those markets.

I don't understand the cultural norms. I don't have the context. I don't speak the language. Um, you know, and so I, I think I would rather be personally a limited partner and investor in the best Chinese GPS than try to be the, the, the GP in China, myself. And I think, um, you know, maybe that's overly conservative, but I just, I just think that the, the skill, there are some skillsets that would transfer, but I think there are more things that that would, and so for us, it's kind of recognizing what are we really great at, and then not expanding beyond that, uh, to me as an investor, that's kind of like first principles, but, um, you know, I 

MPD: [00:52:43] think is the geographical boundary for your firm and how you guys are thinking about it or does it even become more narrow than that over time?

Josh Stein: [00:52:50] Yeah, so I think of it as like where the founders are going to spend their time. So a number of our companies, um, uh, so I have, uh, you know, uh, uh, I've talked to us, has more employees in Portugal than we do in the U S um, by a large margin, one of my most recent investments. You know, we have more, uh, employees in Scandinavia, um, than we do in the U S but in both cases, the founders are resonant in the U S and spend time here.

And, you know, a lot of the executive hiring is here. Um, and so, uh, and you know, you're also primarily this initially targeting us markets. Um, I think I would, I would be hesitant to invest in a company that was targeting an international markets specifically, as opposed to building a solution that naturally scaled to international markets over time.

What about 

MPD: [00:53:36] a offshore management team targeting us markets that doesn't move to the, you know, there was a team out of Paris that wanted to focus on U S customers. Would that be a fit for you or would they team need to move to the U S as well? 

Josh Stein: [00:53:49] The management. Interesting. So I, I would be open to it, but I would also question whether I was the right investor for them.

And I would probably tell them that. And in terms of like cultural team need to move your, um, dad, but also just like, you know, you know, even just time zones and, you know, um, like, do I. You know, do I have the right networks to support them? Um, uh, you know, uh, w you touched on something with the team need to move this whole idea of like founders needing to do anything because the VC say, so drives me crazy.

Like, one of the things I believe really deeply is I've seen every kind of founder be successful or not successful in venture. The one thing I've learned is that it does, there's no one style that works. Uh, there's lots of different sales at work. And I think it is VCs need to recognize that we're in a support role.

Not, we're not, we're the support, we're not the stars, our role. True. And I think that we need to adapt our styles to the, to each founder, not the other way around. So I play a different role all on different boards. And I bring sort of a different me to different companies because it's, it's what works best with each founder.

So I have some founders that want to talk almost daily, right? Or in some cases, if they're engaged in some of their processes, even more than daily, I have some founders that are like, Hey, I'll call you when I need something. I'm fine with both. Um, you know, I, I think this idea that like, well, you know, we're going to do it this way because this is how I like to run board meetings or whatever that stuff drives me.

Crazy. The whole idea of like teams would move because venture capitalists say they have to move. Like you're 

MPD: [00:55:15] not, you're reinforcing my empathic visi, uh, Monica. No, it's great. I think you should go with it. I think people will love it. All right. I want to, uh, wrap this up here. You've been very kind with your time and generous, um, couple of, uh, rapid fire questions for you.

I'm gonna steal some of those nuggets of wisdom used to share. While I would walk into a board meeting, what's been one bit of advice you would give to young VCs listening. What do they need to know to be good at this job? 

Josh Stein: [00:55:42] Yeah, I mean, I think the, the biggest one I'd say is that, that, that whole thing about like, you know, we're the support, not the, not the stars.

Um, I think the other thing would be, um, recognize that there's a long lag between the, the decisions and the results. And focus on process and not, not outcomes. And so I used to play a lot of poker and, you know, in poker you can do absolutely everything right. Make the right decisions and still lose, not just hands, but like sessions, weeks, months.

I mean, you can, there's a lot of variants and the same is true in venture, but I believe strongly that if you're making decisions that are, let's say, you know, instead of flipping a coin, if you're betting 51 versus 49 over time, that's going to work out for you. And so just stick with your process 

MPD: [00:56:26] unless you're doing the volume of deals.

Josh Stein: [00:56:30] Well, but, but each I would argue each investment is a series of hundreds of decisions that are chained over time. Right. And so, um, because yeah, that is one thing that's really, one of the hardest parts about the business is you'll see, well, motivated, intelligent, nice. Hardworking people still fail and you'll see bit we're absolutely the reverse succeed and it can sort of drive you crazy, but you just have to make your peace with there's variance in the world.

And, but if you, um, I guess the other thing I'd say is, you know, reputations take years or decades to build and seconds to destroy. And so, you know, just trying to be cognizant of that and, you know, it's sort of like, you know, um, uh, box had a, one of boxes company values was make mom proud. That's awesome.

You know, totally, 

MPD: [00:57:11] totally agree with that. That's awesome. Okay. One bit of advice for founders, founders listening to know. And so, you know, you've been on both sides of this table here as an entrepreneur, 

Josh Stein: [00:57:22] I'd sort of split into two. I typically the first quick one would be kind of the same thing about the venture.

Like tend to stick with it. Like it's a long haul. It's hard, you know, uh, I, I have so much respect for what I did, you know, three and a half years as a founder and it almost killed me. Um, I have so much respect for founders who do this for, you know, 10, 15, 20 years. Um, It's not even if it seems easy from the outside, it's never easy.

The amount of stress that vendors go through as immense. Um, I'd say, you know, have good support systems, take it easy on yourself. Um, you know, take care of yourself through the journey. Um, because it's, it's a, it's a marathon, not a sprint, um, and mistakes. You're going to make mistakes. You just need to sort of accept them and move on and learn from them.

Um, the other thing I think is persuasiveness. So I think a lot of, um, founders underestimate that, that the primary role of the founder, as opposed to anyone else in the company I would argue is to be a magnet. And you're a magnet for, uh, capital for, for talent. Um, you know, for customers who are, who are betting on this like company that may not exist and that they leave them sort of holding the bag, you're bringing everyone around the vision that you have.

And so persuasiveness is really important. So it's, it's not just building the better mousetrap. You have to be able to communicate it in a way that resonates for all those. So one of the things that we really look for is how persuaded are we. When we talked to the founder, like, is, is he or she getting us excited about their vision?

Um, in a way that, you know, in that, in that first meeting, because that's going to be the same with people that are trying to hire and other investors and customers. And so I think, you know, persuasiveness is not, some people are just born with it. It's definitely something you can learn. Um, there's, you know, there are some, you know, there's lots of great books and training, whatever about it and about just how to kind of frame things and how to get people's attention.

And, um, like when I was, I tended to talk about like my product features, for example, as opposed to talking about customers problems and solutions. Right. And so like, that's like a basic one, you know? Um, but, uh, yeah, I would say like, remember that your, your job is to be a magnet and that's really different than like that.

That's very specific to the founder as opposed to like the seat. Are you necessarily the CEO 

MPD: [00:59:30] as always Josh? Very insightful. Thank you so much for coming on today. I want to give everyone absolutely glad you did this

special. Thanks to Josh for sharing his perspective on the VC industry. Josh is a great guy and an old friend. I hope you enjoyed the combo. If you liked what you heard, please look us up with a like or a five-star review and feel free to share with a friend. You can find me on Twitter at M P D. And to hear more of my conversations with innovators, subscribe on YouTube, Facebook, or any other major podcast platform.

Just search for innovation. Peter Davis.