In an insightful conversation on "20 minutes VC," host Harry Stebings interviews David Teten, partner at FF Venture Capital and a pioneer in venture capital research. Teten shares his journey from a tech-savvy youth to a VC thought leader, emphasizing the importance of being generalists in seed-stage investing and steering clear of life sciences due to a lack of expertise. FF Venture Capital's strategy focuses on supporting portfolio companies to reduce failure rates, attracting a high volume of inbound investment opportunities. Teten highlights the significance of capital raising, outsourced CFO services, and recruiting support as key value-adds for startups. He also discusses the potential of algorithmic sourcing in VC and the challenges faced by traditional VCs in the face of platforms like AngelList. Finally, Teten touches on the fintech landscape, underscoring security, efficiency in manual processes, and data as areas ripe for disruption, alongside his belief in the long-term liquidity premium of illiquid asset classes for informed investors.
"David is a partner at FF Venture Capital and is also founder and chairman of Harvard Business School alumni Angels of Greater New York, the largest angel group in New York."
This quote introduces David Teten's affiliations and his role in the venture capital community, highlighting his leadership in the largest angel group in New York.
"I got fired when I was about 16 because I was working at a very prominent financial services firm and I wrote a memo to it saying, I've uncovered some very weak security in your it system."
This quote explains a pivotal moment in David's early career that showcases his proactive nature and expertise in IT security, which eventually led him to venture capital.
"We should keep our doors open wide to the broadest possible array of companies."
This quote encapsulates FF Venture Capital's generalist investment strategy, emphasizing openness to a diverse range of investment opportunities.
"We have a one out of six writeoff rate which is well below industry norms and that attracts to us over 2000 inbound companies per year, and we filter through them for the approximately one dozen new companies per year in which we invest."
This quote highlights FF Venture Capital's successful strategy of focusing on portfolio support to lower failure rates, which has resulted in a high volume of inbound investment opportunities and a selective investment process.
"I think that that is not a proven thesis as a way of investing, but it is one with a significant chance of success."
This quote suggests skepticism about the current effectiveness of algorithmic sourcing but acknowledges its potential for future success in venture capital.
"There's a lot by historic standards, but low relative to, say, public companies and even the public company universe."
This quote highlights the relative lack of data on private companies, implying that while there's more data than before, it's still insufficient compared to the data available on public companies.
"In our model, we have no one at FFVC, despite our large headcount, whose job is origination."
This quote explains FFVC's unique approach to deal sourcing, which does not involve a team specifically for origination, implying a more efficient use of resources.
"Brand building is a bit of a farce unless you have something underneath it to sell."
This quote emphasizes that brand building is meaningless without genuine capabilities or offerings, suggesting that substance is more important than image.
"So we have worked with over 200 other vcs who have written follow on checks in our companies, and our relationships with them are critical to our company's continued growth."
This quote stresses the importance of a VC's network and its role in securing additional funding for portfolio companies.
"I would look at other funds and say, how many folks do you have in your team? How many portfolio companies do you have? How many checks do you write per year?"
This quote provides a practical framework for entrepreneurs to evaluate the potential value add from a VC, focusing on the VC's capacity to provide support.
No verbatim quote provided for this section in the transcript.
(Note: The last theme "Trends in Venture Capital Operations" is incomplete due to the transcript provided being cut off. Therefore, no direct quote could be included for this section.)
"So that is certainly a trend in the VC world, but it's actually a relatively short list of VCs who do this. The reason is it's really, really expensive."
This quote explains that although attracting top talent from startups is a trend, it is not widespread among VC firms because of the significant costs involved.
"We educate our LPs that this is a highly illiquid asset class... Our LPs are fine with our model, because by definition, they wouldn't have invested if they weren't comfortable with the illiquidity of it."
This quote highlights the importance of educating LPs about the illiquid nature of angel investing and setting the right expectations for long-term returns.
"So we invested in Indiegogo at the seed level when it was not as apparent as it is today... We are certainly monitoring AngelList because there is no question that they are working up the food chain to make themselves the fundamental operating system of this asset class."
This quote discusses the strategic investment in Indiegogo and the awareness of how platforms like AngelList are becoming more influential in the investment ecosystem.
"Our cash, we believe, is greener than the cash from other sources because it comes with a brand, it comes with resources... But I think that the modal VC, two partners and an admin and maybe an analyst is under threat from AngelList."
This quote suggests that the firm's investment is more valuable due to the additional benefits they provide and acknowledges the competitive threat from platforms like AngelList.
"So I'm currently leading a large research study on exactly this topic... First is security. I think that even now, people don't realize just how vulnerable we are."
This quote emphasizes the importance of security in fintech and indicates that the firm is actively researching and investing in companies that provide solutions to security challenges.
lion since we initially invested in them, which allows for secure use of cloud based services. We're also interested in taking manual processes and making them more efficient. We were an early investor in Adipar, which is started by Joe Longsdale...
This quote emphasizes the investment in companies that enhance security for cloud-based services and streamline manual processes, highlighting Addepar as a specific example of innovation in back-office operations.
I'd also point to the data space. I used to run an investment research business, so care a lot about that. We're an investor in earnest research...
This quote shows the importance of the data space for investment opportunities and the speaker's personal interest due to their background, with Earnest Research being a specific example of a valuable investment.
Yeah, I think vcs are aggressive in use of social media, certainly compared with the private equity and hedge fund world...
The quote suggests that while VCs are active on social media, there is a balance to be struck to ensure it does not detract from their primary responsibilities.
I would probably sell on the grounds that it's not clear to me if when they eventually turn on the monetization spigot...
This quote reflects a cautious stance on Amazon's future, particularly regarding its pricing strategy and the potential for new competition.
We use a combination of relate IQ, Salesforce, one of the data vendors that sells data about private companies...
The quote highlights the use of various tools and platforms to source and analyze potential investment deals, indicating a mix of purchased and custom-built solutions.
I am a huge fan of Edward Tufty, T-U-F-T-E who's a professor at Yale...
This quote reveals the speaker's admiration for Edward Tufte's expertise in presenting quantitative data effectively.
Pando daily. I give a lot of credit to for being willing to write about controversial topics and make enemies...
The quote shows appreciation for journalistic courage and the importance of addressing contentious issues in the tech industry.
So talk about Skycatch, which is a company that we invested in not long ago...
This quote explains the reasons behind the recent investment in Skycatch, highlighting the company's capabilities and strategic partnerships.