In the latest episode of "20 minutes VC," host Harry Stebbings interviews Josh Felser, cofounder and general partner at Freestyle, a prominent San Francisco seed fund with investments in companies like Airtable and Patreon. Felser discusses his journey from founding two successful companies, Spinner and Grouper, which sold for substantial sums, to becoming a venture capitalist. He emphasizes the importance of transparency and trust between founders and VCs, and shares insights on navigating the M&A process, stressing the need to anchor high during negotiations and the strategic use of time and board relationships. The conversation also touches on the importance of supporting women in tech and the role of VCs in hiring and company exits. Additionally, the episode features promotions for Foundersuite and Greenhouse, tools designed to assist startups and growing companies in fundraising and hiring.
"Hello and welcome back to the 20 minutes VC with me, your host Harry Stebbings, found most often on Snapchat at h stepbings with two B's and all ads get a personal thank you message from me."
This quote is Harry Stebbings introducing himself and his social media presence, highlighting his personal engagement with his audience.
"However, to the show today and what a great guest we have in store for you."
Harry Stebbings transitions to introducing the day's podcast guest, setting the stage for the interview.
"So, joining me in the hot seat day, I'm thrilled to welcome Josh Felsa, cofounder and general partner at Freestyle, one of San Francisco's leading early stage seed funds, with investments in the likes of about me, airtable, Intercom and Patreon, just to name a few."
Harry Stebbings provides a brief overview of Josh Felser's professional background and his venture capital firm's notable investments.
"As for Josh, prior to being in VC with Freestyle, Josh started two successful Internet companies, Spinner and Grouper, which were acquired by AOL Time Warner and Sony for $320,000,000 and $65 million, respectively."
Harry Stebbings summarizes Josh Felser's entrepreneurial success before moving into venture capital.
"Foundersuite makes the leading CRM for raising startup capital. Since March of 2016, Foundersuite customers have raised over $130,000,000 in seed and venture capital."
This quote explains the purpose and success of Foundersuite, a tool for startups to manage their fundraising efforts.
"Recognized as the 2017 best place to work in the US by Glassdoor, Greenhouse currently works with over 1500 of the world's most innovative companies, such as Airbnb, Slack Snap Inc. And Lyft."
This quote highlights the achievements of Greenhouse Software and its role in helping companies with their hiring processes.
"Well, I did name my, I did come up with know everyone has a different interpretation. And so I'll say it personifies the way that Dave and I kind of move through the world. We don't conform to anybody else's definitions of what we should be or vcs should be like. And so freestyle seemed to be a perfect know. We're entrepreneurs at heart, we're operators, and it defines how we are as vcs. So freestyle was the best name I could come up with."
Josh Felser discusses the origin of the name "Freestyle" for his VC firm, emphasizing their unique and entrepreneurial approach to venture capital.
"But being an operator is the most stressful thing you'll ever do. I think it can evolve you, but it can also make it hard to experience the other pleasures in life."
Josh Felser reflects on the intense stress of being an entrepreneur and how it can overshadow other aspects of life.
"Both. It was such a relief to have sold it. And then kind of all the things that you push down inside as an entrepreneur, while you're in the middle of it, you can't afford to be depressed. You can't afford to have anything sway you from your mission."
Josh Felser describes the emotional release after selling his company, highlighting the necessity of emotional resilience during entrepreneurship.
"Well, I think the easy answer is it depends, right? It really depends on the VC and the situation."
Josh Felser states that the trustworthiness of a VC is not a one-size-fits-all answer and varies with context.
"And so there are moments when you shouldn't trust your vc, and those moments should be called out. They shouldn't be mysteries."
Josh Felser acknowledges that there are times when founders should be cautious in their trust towards VCs and that these moments should be transparent.
"Sometimes VCs want entrepreneurs to sell more rapidly and other times they want them to go for it. And these desires may be in conflict with what the entrepreneur wants."
This quote highlights the potential for misalignment in objectives between VCs and entrepreneurs, especially regarding the pace and scale of selling a business.
"Well, later stage VCs really become more transactional, I think, than early stage VCs."
Josh Felser explains that as companies grow and enter later stages of funding, the interactions with VCs become more focused on financial transactions rather than relationship building.
"There is hopefully a trend towards more transparency between founders and VCs, so that it's actually not a mystery when you're not on the same page."
Josh Felser advocates for greater openness in the founder-VC relationship, reflecting on his own negative experiences with non-transparent VCs.
"I believe the entrepreneur, for his or her own personal reasons, threw in the towel early because they were having a moment in time that was very negative around fundraising."
Josh Felser uses a specific case to illustrate how personal challenges in fundraising can lead a founder to exit prematurely.
"So if I look at my ultimate duties to my lps, so short sightedly, I could have said, well, I'm going to fight this acquisition and maybe maximize shareholder value for this company, but that could damage my reputation to the point where it impacts my ability to create great returns for my LPS longer term."
Josh Felser discusses the delicate balance between immediate shareholder value and the long-term reputation and trust that a board member must maintain with LPs.
"So the signaling risk I think you can overcome if the insiders decide to lead the next round, I think you can rage the company and the new CEO to some proof points that would work for the subsequent rounds."
Josh Felser acknowledges the challenges of leadership changes but suggests that insider support can help navigate the transition and set up for future success.
"So I guess my evolution is really around my communication style and being more transparent when we actually have a conflict and I have an internal conflict."
Josh Felser reflects on his development as a board member, emphasizing the importance of clear communication and transparency in managing the dual responsibilities of supporting entrepreneurs and maximizing company value.
"I promise entrepreneurs that I will never have a conversation about them that they don't know about with other investors."
This quote emphasizes the commitment to transparency, ensuring that entrepreneurs are always in the loop regarding discussions that involve them, thereby fostering trust.
"It's been reinforced by the feedback I've gotten from founders that I've worked with."
Feedback from founders has highlighted the positive impact of transparency on their relationship with board members, reinforcing the importance of this approach.
"Every text, every email, every tweet, every call is an opportunity for you to sell your company, right? Or to improve the valuation."
This statement underlines the importance of considering every interaction as a chance to positively influence the perception and value of the company.
"So when an acquirer asks you that, the goal is to come up with a valuation that's way higher than what you would take, but not so high that the acquirer hangs up on you."
This quote explains the delicate balance in setting an ambitious yet realistic anchor point in valuation discussions to maximize the sale price without alienating the acquirer.
"I remember I looked the corp dev person in the eye when I said it, and he looked down first."
The quote illustrates the psychological aspect of negotiation, where confidence and non-verbal cues can influence the outcome.
"I wouldn't want time to be the reason we don't work together."
This quote suggests a negotiation tactic where implying a time constraint can create urgency and pressure on the acquirer to move forward with a deal.
"Use your board. Like, blame everything on your board. Say the board is the impediment to getting a deal done."
This strategy involves using the board as a scapegoat to avoid being the 'bad cop' in negotiations, thereby maintaining a positive relationship with the acquirer while still pushing for better terms.
"Just do the best you can for your investors. You won't always win, but you want to feel, as a founder, you want to feel like you support the people who supported you."
This quote advises founders to strive for equitable outcomes for their investors during exits, as a show of gratitude and fairness for their support throughout the company's journey.
You made an effort. It's one of the great challenges with the Aqua hire, and I feel fortunate. I think that when we've been in this situation that our investors have. I mean, our entrepreneurs have done right by us.
This quote emphasizes the difficulty of aqua hires and the speaker's gratitude for having responsible investors and entrepreneurs.
I wouldn't tell the team until you have a deal. The founders just have to bear this burden on their own.
This quote advises keeping potential exit deals confidential from the team until they are finalized to prevent unnecessary distraction or disruption.
Book and why snow Crash? Because it propelled me to do tech. It kind of has everything in there. Dystopia, politics, metaverse.
This quote explains how the book "Snow Crash" influenced the speaker's career choice by combining various compelling themes.
If you choose not to decide, you still have made a choice.
This quote, borrowed from the band Rush, implies that inaction is also a form of decision-making, relevant to the discussion on the intersection of politics and technology.
Taking up, I would say, a quarter of my day in thought and tweeting and responding and strategizing how to get ourselves out of this fucking mess.
This quote reveals the speaker's deep involvement and concern with the current political situation and its impact on their daily activities.
So we have massive egos as think, and you have to remember, we get thousands of emails. So make me laugh, make it personal and make it insightful.
This quote provides advice on how to effectively cold email a venture capitalist by appealing to their ego and desire for personalized and insightful communication.
Talk to so men who make up most of the venture capital community. Men hate asking men or other women for help. We just hate asking for help.
This quote highlights the reluctance within the venture capital community to seek help, which is necessary to increase diversity in tech.
So the last investment I made is in carbon robotics. It's a sub $5,000 robotic arm with the payload of a massively expensive robotic arm.
This quote explains the speaker's recent investment decision, highlighting the value proposition of Carbon Robotics' product in comparison to more expensive alternatives.
Foundersuite makes the leading CRM for raising startup capital.
This quote introduces Foundersuite as a valuable resource for startups looking to raise capital.
Greenhouse software designs tools that helps companies hire great people and ultimately build better businesses.
This quote introduces Greenhouse as a tool for improving the hiring process within companies.