In this episode of the 20 Minutes VC, host Harry Stebbings interviews Steve Schlafman, early-stage investor at RRE Ventures. Schlafman shares his journey from a tech-obsessed kid to a VC, detailing his experiences at Microsoft, a startup called Massive, and working for the Kraft family before entering the venture capital world. He discusses the differences between seed and Series A investing, emphasizing the role of instinct in seed funding and the importance of founder, product, and market in investment decisions. Schlafman also highlights the significance of mentoring within the VC ecosystem and the need for education on fundraising nuances. Additionally, he recommends reading materials that focus on hiring processes and leadership, and introduces Brightwheel, his recent investment in a SaaS platform for pre-K education, showcasing his commitment to investing in solutions for antiquated markets.
"Welcome back to another episode of the 20 Minutes VC with your host Harry Stebings. And you can find me, as I'm sure you all know by now, on Snapchat at H. Stebbings with two b's for all things behind the scenes at 20 minutes VC."
This quote is Harry Stebbings introducing the podcast episode and mentioning where listeners can find additional content related to the show.
"But now for today's show, I'm thrilled to welcome a good friend of mine and fantastic VC, Steve Schlaffman."
Harry Stebbings expresses excitement about having Steve Schlafman, a venture capitalist, as a guest on the show.
"However, before we jump into the interview today with Steve, if you've not had a chance to check out the amazing design crowd, then it really is a must."
Harry Stebbings takes a moment to promote DesignCrowd, a design service platform, before starting the interview.
"Sure. So I always like to say I'm a little bit of an accidental VC I never really intended to get into this line of business."
Steve Schlafman shares his unplanned journey into becoming a venture capitalist.
"I got my first Nintendo when I was four years old, and I owned every console up through high school. That really started my love for gadgets."
This quote highlights Steve Schlafman's early passion for technology and gadgets, which influenced his career path.
"I had a really unique opportunity to go work for a startup here in New York called Massive, which was an in-game ad network where I worked for the COO, running a team for her, specifically around network projections and ad operations."
Steve Schlafman discusses his experience at Massive, which provided him with insights into startup operations and the advertising industry.
"I had a chance to move back to New York, which was calling me. And I saw the rise of technology. Things were just getting started here, companies like Betaworks and Kickstarter and Tumblr."
The quote reflects Steve Schlafman's decision to return to New York due to the burgeoning tech scene and his desire to be part of it.
"I've been at re now for about three years, and it's been a really great experience. Re is a little bit of a different beast in that rather than just focusing on seed, we also focus slightly later series A and Series B."
Steve Schlafman explains his current role at RRE Ventures and the firm's investment focus, highlighting his experience with different funding stages.
"Making the transition hasn't been easy for me, admittedly, just to talk about seed for a second, I really think seed is about, is just pure hustle, right? It's about moving quickly, it's about doing a set level of diligence. But the reality is that there's really very little data to go off of."
This quote explains that the seed stage is fast-paced with decisions often made on limited information and a focus on the entrepreneur's potential.
"As for Series A, because you're putting more capital to work, I sort of view these things as you have the opportunity. If you see things at the seed stage, whether you invest or not, you can build relationships with founders over a longer period of time and really get to see how a company evolves, which I think is a big difference."
The quote illustrates that Series A funding allows investors to engage more deeply with companies over time, observing their growth and market changes.
"And so the math really changes. Because of the math changes, you also want to price it in a range where it's not crazy, in that it's not going to hurt the company when they go out and try to raise the series anyhow."
Steve Schlafman emphasizes the importance of financial calculations at the Series A stage, ensuring that valuations do not hinder future fundraising efforts.
"I can think of several companies I've seen, both in my time at lear and at re, where a company, they sort of optimized valuation in the amount that they raised, and then when they went out to go and raise the next round, even though the business has continued to do well for a number of factors, including the market changing slightly, or investor, the series B investors wanting to see certain kinds of metrics and not having them, they don't get as much of a step up on the last round that they were hoping."
This quote highlights the potential downside of focusing too much on valuation in early rounds, which can lead to disappointing valuation increases in future rounds.
"Anytime I'm sitting across the table from an entrepreneur and we're discussing this topic, it's something I will educate them on."
This quote indicates Steve Schlafman's commitment to guiding entrepreneurs through the complexities of fundraising and valuation.
"But it's my job to at least share the different perspectives. Again, my job as an investor, what I realize is, and it's something I've been thinking a lot about lately, it's very hard to control an investment."
The quote suggests that while VCs can advise, they cannot control the outcome of an investment, emphasizing the advisory role over the controlling role in the VC-founder relationship.
"My job as an investor isn't to be a control freak after the investment. It's to help educate and partner with the founder, focus on building a company over the long term."
The quote emphasizes the investor's role in providing guidance and partnership rather than exerting control, with an eye on long-term company growth.
"At the seed stage, a lot of it is gut...I think seed is a very instinctual style of investing."
This quote highlights the reliance on instinct when making seed stage investments, suggesting that data and metrics are less prominent at this early stage.
"Each partner can invest in anywhere from three to five seed deals a year...the purpose of our seed program is that it rewards those who have conviction around a specific theme or founder."
The quote outlines the flexible structure of RRe's seed investment program, which allows partners to follow their convictions.
"It's not to say that we're deprioritizing market like market is absolutely important, but I think our job as a vc isn't to get fooled into thinking that a market is small, because sometimes the best ones are the ones that appear small but end up becoming fairly meaningful."
This quote underlines the challenge for VCs to recognize the potential in markets that may initially appear small but have significant growth potential.
"I sort of like opportunities...I've funded companies in very competitive spaces...But in the case of Giphy, there's not a market, it's a brand new market."
Steve Schlafman expresses a preference for unique opportunities, whether in competitive markets with a differentiated offering or in entirely new markets.
"Sounds awesome...I try to read at least 30 a year."
The quote indicates Steve Schlafman's positive attitude toward the quick fire round and his commitment to reading as a habit.
One is called who, which is all around running a highly structured hiring process. The other is work rules by Laszlo Bach, who ran people at Google that talks a lot about Google's philosophy around people and how they hire, train and retain the best employees. And then finally, I just finished reading leading by Alex Ferguson and Michael Moritz, which was just really phenomenal.
The quote summarizes the themes of the three recommended books, emphasizing the importance of structured hiring, Google's people management philosophy, and long-term leadership success.
The one thing that I don't think happens enough is mentoring. And not just mentoring within firms, but also mentoring cross firms.
The quote highlights the need for increased mentoring within the venture capital industry, suggesting a collaborative approach among competitors and partners.
There are a few every day. I read Fred Wilson's blog, ABC. I love stratechery by Ben Thompson. I think he's a genius. And finally, the skim where I get a quick dose of news every morning.
The quote lists the blogs and newsletters Steve finds valuable for staying informed and gaining insights into the industry.
One is just building relationships over long periods of time, having people that I can trust and go to. And sometimes these are my peers in the business, and other times it's investors that have been doing this for 20 plus years. But I do think it's a blend.
The quote explains the importance of building trust and relationships over time as a foundation for mentorship, and also the value of seeking mentorship from experienced professionals.
Yes, I would say that the one that is most recent is a company called Brightwheel, which is a SaaS offering that's powering pre k education.
The quote describes Brightwheel's business model and its impact on the pre-K education sector, highlighting the reasons for Steve's investment.
Yeah, no, thanks so much for having me, Harry. It's always a pleasure.
The quote is Steve Schlafman's expression of gratitude for being part of the show.
And if you love the show and want to see more from me, then you can add me on Snapchat at htebbings and you can sign up to our newsletter so you never have to miss an episode or an update from us on the Twentyminutevc.com.
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