20VC Accel's Dan Levine on The Current State of Seed & Series A, The Rise of PreEmptive Rounds, Solo Capitalists and MultiStage Funds Entering Seed & Market, People and Product; What To Prioritise



In this episode of "20 Minutes VC," host Harry Stebbings interviews Daniel Levine, a partner at Accel, a top-tier venture firm with an impressive portfolio including Facebook, Slack, and Dropbox. Levine shares his journey from founding a Y Combinator startup to joining Accel, leaving to help Dropbox open its platform to third-party developers, and then returning to Accel to lead investments in companies like Scale AI and Sentry. He emphasizes the importance of team and market in early-stage investments and discusses the dynamics of multi-stage firms participating in seed rounds, stressing the significance of ownership and building genuine relationships with founders. Levine also touches on the venture community's need for more empathy and compassion and the positive signal an Accel seed investment can convey in the market.

Summary Notes

Introduction to Daniel Levine and Excel

  • Daniel Levine is a partner at Excel, a leading venture firm.
  • Excel's portfolio includes Facebook, Slack, Qualtrics, Uipath, and Delivery.
  • Levine joined Excel in 2010, left for Dropbox, and then returned to Excel.
  • He has led investments in Scale AI, Mux, Vercel, and Sentry.
  • Acknowledgements to Alex at Scale, John at Mux, Andrew Brachier, John Locke, and Vasna Tajarun for their contributions to the podcast.

"And so diving right in and I'm thrilled to welcome Daniel Levine, partner at Excel, one of the leading venture firms of the last decade, with a portfolio including the likes of Facebook, Slack, Qualtrics, Uipath and Delivery, to name a few."

This quote introduces Daniel Levine and highlights Excel's significant portfolio, establishing the context for Levine's expertise in venture capital.

Daniel Levine's Career Path

  • Levine's path to venture capital was unconventional.
  • Founded a company called Chariot and went through Y Combinator.
  • Initially a terrible founder, he left the company and joined Excel.
  • Met Kevin Effrosy from Excel during his time at Chariot.
  • Joined Excel in 2010, needing a job and wanting to learn about venture capital.
  • Left Excel after two years to join Dropbox, where he worked on the platform team.
  • Returned to Excel, transitioning from an associate to a principal and then a partner.
  • Focuses on helping founders and the entrepreneurial community.

"Honestly, I never envisioned being a venture capitalist right before I joined the first time around in 2010, I had founded a company called Chariot, went through Y Combinator, and candidly, I was a terrible, terrible founder for a variety of reasons."

Levine shares his background as a founder and his initial view of venture capitalism, which provides insight into his early career and mindset before entering the venture capital field.

Lessons from Dropbox Experience

  • Dropbox experience was a form of business school for Levine.
  • Learned humility and the significance of a great team and product.
  • Recognized the importance of individual contributions but also the collective impact of a team.
  • Gained practical knowledge of company dynamics and incentives.
  • Applied lessons from Dropbox to other companies and investment decisions.

"Fundamentally, I think almost all of the best lessons I've learned are effectively lessons of humility, like learning about what I don't know."

Levine reflects on the humility he gained from his time at Dropbox, emphasizing the value of recognizing one's limitations and the collective strength of a team.

Insecurities as an Investor

  • Levine acknowledges insecurities in various aspects of his role as an investor.
  • Concerns about making good investment decisions and working effectively with founders.
  • Personal relationships with founders and tech community members can be complicated by his role as a venture capitalist.

"I mean everywhere. I mean candidly, I'm a short, bald guy. I have a lot of insecurities."

This candid admission from Levine about his insecurities humanizes him and underscores the challenges faced by venture capitalists in balancing professional and personal relationships.

Personal Insecurities and Community Contribution

  • Discusses the emotional challenges of facing doubt and distrust within one's industry.
  • Highlights the speaker's efforts to contribute positively to their community despite insecurities.
  • Emphasizes the day-to-day encounters with skepticism, despite achievements and contributions.

"But I have a lot of insecurity about my place in the community and that I'm always going above and beyond to be contributing in a positive way."

The quote reveals the speaker's feelings of insecurity and their continuous effort to make a positive impact within their professional community.

Seed and Series A Market Conditions

  • Observations on the unprecedented speed and pricing of deals in the current market.
  • Concerns regarding the sustainability and implications of these market trends.

"I've never seen the velocity of deals being done. I've never seen the pricing that's being done."

The quote underscores the speaker's alarm over the rapid pace and high valuations in the current investment market, which is unusual based on their experience.

Investment Approach and Market Dynamics

  • The speaker tries to maintain a neutral perspective on market conditions.
  • Focuses on building long-term relationships with founders and accepts higher market pricing as a reality.
  • Recognizes the potential advantages of a liquid market for established firms and the challenges for new entrants.

"I try not to have opinions about the market. I just kind of try and focus on what I'm doing, my little slice of the world, and what I can control."

This quote reflects the speaker's approach to investment by focusing on factors within their control rather than trying to predict or judge the market.

Prioritization in Investment: People, Market, Product

  • Initially prioritized people over other factors but now considers the market equally important.
  • Recognizes that a strong market can lead to success even with weaker teams, and vice versa.

"I was always so hell bent on only people being the only thing that mattered."

The quote illustrates the speaker's initial investment philosophy, which was heavily weighted towards the quality of the people involved in a venture.

Investment Criteria: Team and Market Evaluation

  • Evaluates investments based on a combination of team qualities and market potential.
  • Looks for founders who are likable, intelligent, hardworking, and capable of attracting talent.
  • Analyzes market size and efficiency of initial market entry.
  • Uses financial progress as a debugging tool rather than a primary criterion.

"The two and a half things are people market. And then how it's gone lately, how it's gone so far, given time and money."

This quote summarizes the speaker's investment evaluation criteria, focusing on the team, the market, and the company's progress to date.

Market Timing and Investment Risks

  • Prefers to avoid market timing risks but will take them on occasion.
  • Emphasizes humility and the dangers of overconfidence in one's ability to predict market timing.
  • Believes that being early in a market isn't always the most profitable; later stages can be more lucrative.

"I think the biggest risk around market timing is when an investor thinks they are really good at market timing."

The speaker warns against the arrogance of believing one can predict market timing accurately, suggesting it can lead to risky investment decisions.

Thesis-Driven Investing

  • Adopts a limited number of obvious theses, such as a strong belief in the potential of software.
  • Derives investment focuses from core beliefs, such as developer tools and infrastructure.
  • Skeptical of complex theses that require being the smartest investor to succeed.

"So, yeah, my core thesis is boring at software, even from a consumer perspective."

This quote conveys the speaker's primary investment thesis, which is a simple but strong belief in the transformative power of software.

Venture Capitalist (VC) Twitter and Personal Brand

  • Considers Twitter a marketing tool for some investors but doesn't see it as the best medium for detailed dialogue.
  • Prefers to focus on the quality of the product (investment) rather than personal branding on social media.

"I think the best marketing is a great product."

The quote suggests that the speaker believes in the value of substance over social media presence, emphasizing the importance of the quality of one's work over personal branding.

Personal Branding and Marketing in Venture Capital

  • Harry Stebbings discusses the potential pitfalls of venture capitalists (VCs) building a personal brand on Twitter.
  • He expresses concern that VCs may have undue influence on markets and that Twitter personas may not always reflect depth of value.
  • Daniel Levine agrees, emphasizing the importance of focusing on the team rather than individual branding.
  • Levine also raises concerns about the impact of personal branding on founders and the importance of not detracting attention from them.

"I don't think people focus too much on one of the challenges of Twitter is that these personalities develop, but it's hard to understand the underlying depth of value there."

This quote highlights the challenge of conveying genuine expertise and value through a platform like Twitter, where personalities can overshadow substance.

"I think VCs aren't careful enough in our ability to influence markets and we really shouldn't."

Levine is cautioning against VCs overstepping their roles by influencing markets, suggesting that their primary job is to provide funding rather than direction.

"I never want to be taking away attention from the founders doing hard work."

Levine is expressing his preference for a team-centric approach over personal branding, emphasizing the importance of highlighting the achievements of founders rather than himself.

The Role of Personalization in Venture Capital

  • Harry Stebbings argues for the increasing importance of personalization in venture capital, where investors connect with individual VCs like Daniel Levine rather than the firms they represent.
  • Daniel Levine acknowledges the rise of solo capitalists and their quick decision-making processes but maintains his preference for the partnership model.
  • Levine emphasizes the value of contributing to a firm's brand and legacy, which supports founders and lasts beyond individual contributions.

"I think we're seeing the personalization of venture more than ever, and people want to fundamentally connect with Dan Levine."

Stebbings is highlighting the trend of personal connections in venture capital, where investors seek a direct relationship with individual VCs.

"I love contributing into a brand that is Excel and then passing that on to another group and sharing that brand with our companies."

Levine expresses his commitment to the partnership model and the collective brand of his firm, Excel, which he believes adds value to the companies they work with.

Multistage Firms Investing at Seed Stage

  • Harry Stebbings discusses the trend of multistage firms investing aggressively at the seed stage, leading to higher valuations and a focus on securing future investment rounds.
  • Daniel Levine reflects on the history of venture capital and the importance of being the first institutional investor, emphasizing ownership stakes and brand building.
  • Levine stresses the importance of price and ownership, arguing that venture firms should not indiscriminately drive up valuations but instead demonstrate the added value of their capital.

"Our first investment in slack was a seed. Our investment in sentry started as a seed. Our investment in Cloudero was an EIR."

Levine provides examples of successful seed investments by Excel, underscoring the firm's history and expertise in early-stage investing.

"I think price really matters. I would focus more on ownership mattering."

Levine clarifies that while price is important, the primary goal is to secure a significant ownership stake that aligns with the firm's brand and relationship with founders.

"I think every venture firm in the world should be attempting to do this, because I think that's the best part of the market, is that seed series a first institutional capital round."

Levine advocates for venture firms to engage in early-stage investing, which he views as a core aspect of the venture capital business model.

Signaling Concerns in Seed Investing

  • Harry Stebbings raises the issue of signaling, where the decision of a venture firm to follow on or not in future funding rounds can send a message to the market about a startup's prospects.
  • Daniel Levine discusses Excel's approach to seed investing and how the firm's brand helps mitigate signaling concerns.
  • Levine shares data on Excel's seed investment performance, demonstrating the firm's commitment to meaningful participation in early-stage companies.

"This is an example of why I'm blessed to be able to work at Excel, and it's a huge advantage having kind of the firm's brand as a new investor."

Levine attributes part of his success in avoiding negative signaling to the strong brand and reputation of Excel.

"So we looked at the data on this, actually, a couple of years ago, we looked at a cohort of seed deals we'd done over the course of three years."

Levine provides evidence of Excel's strategic approach to seed investing, suggesting that the firm's methodology is data-driven and carefully considered.

Excel Seed Investment Outcomes

  • Excel's seed investment outcomes are highly positive.
  • Out of 25 mature investments, 18 raised follow-on capital.
  • Two companies failed, three were acquired, and the remaining did not receive further funding.
  • Excel seed investment is a strong market signal.
  • Excel's seed program's failure is attributed to positive signaling, not company underperformance.
  • 18 companies raised Series A, but only 12 were funded by Excel.
  • Other firms sometimes lead Series A rounds due to quicker fundraising or higher valuations than expected.

"Of the 25 that were maturity at the time, 18 of them had raised follow on capital from us or other people. A series a. Of the remaining seven, I think two had died, one to an OD legal situation, one had run out of capital. I think maybe three had been acquired and a couple others had not been funded." "The signal of an excel seed is the most positive thing you can almost possibly have in the market, which we were somewhat surprised to see."

The first quote summarizes the outcomes of Excel's seed investments, indicating their strong performance and the positive signal to the market. The second quote emphasizes the unexpected but significant positive market signal that an Excel seed investment represents.

The Ongoing Sales Process for Founders

  • Founders face a continuous sales process, especially when dealing with multi-stage funds.
  • Seed investors like the speaker may not lead Series A or B, reducing the need for founders to sell to them further.
  • Founders may hesitate to share negative aspects with investors who they hope will lead future rounds.
  • Multi-stage funds must build strong relationships and support founders regardless of circumstances.
  • Excel focuses on significant ownership at the seed stage to align incentives with founders.
  • The relationship between lead investor and founder is a persistent dynamic.
  • Venture capitalists must be deeply involved and supportive due to their stake in the company.

"The final concern that I have is essentially the sales process doesn't end for the founder." "It's a really interesting challenge, I think so long as you could potentially buy up." "We want to own a bunch of the company in the seed stage, as opposed to small percentage in the case of scrappy." "Our job is to help the company as best we can, as much as possible."

The first quote expresses the speaker's concern about the never-ending sales process for founders. The subsequent quotes reflect the speaker's perspective on the importance of building relationships with founders, the strategy of owning a significant portion of a company from the seed stage, and the ongoing responsibility of venture capitalists to support their investments.

Personal Relationships in Venture Capital

  • Balancing personal relationships with professional responsibilities is challenging in venture capital.
  • Venture capitalists are often seen first as investors rather than friends by their portfolio company leaders.
  • The speaker acknowledges the personal difficulty but also the privilege of their role.
  • Venture capitalists should be empathetic and compassionate, recognizing their fortunate position.

"The hardest element by far is the personal relationship with all of my friends and balancing that with work." "It's very personally difficult. But again, I can't stress enough, I'm very fortunate."

The quote highlights the speaker's struggle with managing personal relationships within the professional context of venture capital, while also acknowledging the fortunate nature of their position.

Founder Mistakes in Early Funding Rounds

  • Founders sometimes overemphasize advice found on the internet when raising early rounds.
  • The key for investors is to like the founder and understand their market.
  • Founders should focus on authenticity and building genuine relationships with potential investors.
  • Founders should thoroughly vet investors to ensure a good working relationship.

"I think overrotating on things they read on the Internet." "Do we like you, do we want to work with you, do we want to help you?"

The quotes address common mistakes founders make by overly relying on internet advice and not focusing enough on building authentic relationships with investors.

Venture Industry Mechanics

  • The speaker wishes the venture community was more empathetic and compassionate.
  • There is a call for venture capitalists to recognize their privilege and act responsibly towards founders, LPs, and the broader community.
  • The speaker finds the personal dynamics in venture capital the most challenging aspect.

"I just wish the venture community was dramatically more empathetic and compassionate and trying harder on those things across the board." "It's not really a mechanic, so that's why it's a cop out question."

The quotes reflect the speaker's desire for a more empathetic venture capital community and acknowledge the challenge in changing the industry's mechanics to reflect this ethos.

Memorable Board Members

  • The speaker has enjoyed working with various board members, both experienced and new to the industry.
  • They appreciate the balance provided by experienced investors and the excitement brought by younger VCs.
  • The speaker has a positive view of the quality of venture capitalists they work with.

"I particularly enjoy working with them. But I also enjoy working with wonderful young people like Julia Schottzi at NEA on the board of Sentry, Christina shed on the board of Mox."

This quote highlights the speaker's enjoyment and appreciation for the diversity and quality of board members they have worked with.

Recent Investment in Altinity

  • The speaker recently invested in Altinity, a company built around the open-source project Clickhouse.
  • Clickhouse is a popular data analytics database used by major companies.
  • The speaker was drawn to Altinity due to the strong market validation of Clickhouse and the team's previous success in the database space.
  • The investment decision was influenced by positive feedback from trusted sources and the speaker's own interest in the technology.

"I recently invested in a company called Altinity, which is building a company around the open source project Clickhouse." "It's kind of a very, very popular project that's been adopted by huge companies like Cisco, Uber, Cloudflare, Sentry, Mux, Instana Segment, Tencent, Bytedance, et cetera, et cetera, et cetera."

The quotes discuss the speaker's recent investment in Altinity and the reasons behind the decision, emphasizing the widespread adoption of Clickhouse and the speaker's confidence in the market and team.

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