20VC How To Build True Human Relationships with VC PreInvestment, Why Valuation Is Not The Only Term and When To Take Lower Offers & How To Approach Mental Health As A Founder with Jon Dishotsky, Founder & CEO @ Starcity

In this episode of Founders Friday on the 20 Minute VC, host Harry Stebbings interviews John Dashotsky, founder and CEO of Starcity, a company revolutionizing urban living by making cities more affordable. John's journey from conducting multimillion-dollar real estate transactions to founding Starcity is explored, highlighting his innovative approach to co-living inspired by his childhood experiences. The discussion delves into the challenges and strategies of fundraising in the property technology sector, the importance of founder-investor relationships, and the significant role mental health plays in entrepreneurial success. John emphasizes the value of seasoned founders, the impact of family life on work balance, and his vision for Starcity's future in urban accessibility. The episode also touches on the benefits of TravelPerk, Stripe, and Intercom for scaling businesses and managing customer engagement.

• Harry Stebbings introduces the Founders Friday episode on the 20 minutes VC podcast.
• John Dishotsky, the founder and CEO of Starcity, is welcomed as a guest.
• Starcity's mission is to make cities more affordable, enabling people to live with great individuals in cities they love.
• John has raised over $28 million in funding from various notable investors.
• Prior to Starcity, John was involved in multiple commercial real estate transactions.
• John has also worked at Cushman and Wakefield and is an active angel investor.

"Now, John is the founder and CEO at Starcity, the startup on a mission to make cities more affordable for everyone, allowing you to live with great people in the city you love."

The quote introduces John Dishotsky and his company, Starcity, highlighting its mission and his role as the founder and CEO.

• Harry Stebbings invites listeners to follow him on Instagram.
• He acknowledges previous guests who introduced him to John.
• Harry discusses the importance of scaling time and introduces TravelPerk, a travel management platform.
• He mentions the benefits of using TravelPerk, such as ease of booking, compliance, savings, and customer support.
• Harry also introduces Stripe and Intercom as resources for scaling businesses and engaging with customers.

"I'm always focused on scaling my time."

This quote emphasizes Harry's interest in efficiency and productivity, particularly in the context of managing business travel with TravelPerk.

• John's parents eloped to San Francisco during the counterculture movement.
• Co-living experiences during John's childhood influenced his interest in affordable city living.
• John's fascination with cities and entrepreneurship began early in his life.
• He was inspired by his work with startups and the challenge of city affordability to found Starcity.

"So in 2015, I resigned from my career, and the headlines about cities being so unaffordable had just started to really grind on me."

John explains his motivation to leave his career and start Starcity due to the growing issue of city affordability.

• John's founding moment for Starcity was a realization of how co-living could make cities more accessible.
• The idea was to recreate the benefits of his childhood co-living experience on a larger scale.

"That was sort of the moment where the sort of light bulb where I said, okay, let's build a product that makes cities accessible to everyone versus being available to a select few."

John describes his epiphany to create Starcity to make city living affordable and accessible to a broader audience.

• Harry identifies the founder-market fit as a key aspect he looks for when investing.
• John's early experiences with diverse and multigenerational living situations are seen as foundational to his current venture.

"And so hearing those kind of early days at Stanford with the different students is awesome to hear."

Harry acknowledges the significance of John's early co-living experiences as a precursor to his founder-market fit with Starcity.

• Harry proposes to divide the show into discussing tangible and intangible aspects of building a business.
• John agrees to this structure for the conversation.

"But I do want to separate the show into two different parts, the tangible and the intangible. Does that sound okay to you?"

Harry suggests a format for the podcast episode, which John accepts.

• John discusses why proptech has taken time to gain traction with venture capitalists.
• The potential for proptech companies to provide returns to investors is a key factor.
• John mentions that WeWork set the stage for proptech's popularity among VCs.

"I think it was really WeWork that sort of set the tone for."

John points to WeWork as a significant influence in the rising interest from VCs in the proptech space.

• There is a divide in Silicon Valley's approach to venture capital (VC) investment.
• Traditional VC tends to focus on familiar sectors, while some are exploring more challenging markets.
• There is a shift towards tackling "gritty, harder problems" in sectors like transportation, logistics, real estate, and construction.
• This shift is due to the realization that many startup ideas in popular sectors are already taken and the risk of being outcompeted by major firms like Facebook or Instagram.

"There's the side of the valley that says, look, we're only going to do the traditional vc stuff. And then there's the other side of the valley that says, like, look, building another social media app, just going to get blown up by Facebook or Instagram because they're going to launch a feature and that company will be dead."

The quote highlights the two prevailing investment philosophies in Silicon Valley, contrasting the traditional VC focus with the emerging trend of solving more complex and less conventional problems.

• StartCity did not initially concern itself with VC preferences, focusing instead on creating the best possible product.
• The company engaged with potential customers and the supply side to identify a significant market need.
• The approach was to build a minimum viable product (MVP) and then seek capital to scale.
• Despite initial doubts, VC interest was piqued due to the size of the market problem and the innovative nature of the product.

"So we didn't really approach the problem from looking at what would vcs think from the outset. We sort of said like, let's build the best thing we possibly can and then see what part of the capital markets would actually be open to helping us scale."

This quote explains the company's strategy of prioritizing product development over aligning with traditional VC expectations, reflecting a focus on solving real-world issues before seeking investment.

• The founder of StarCity expresses high regard for Y Combinator's (YC) support for founders.
• Authenticity and passion for one's company are crucial when applying to and interviewing with YC.
• Founders should sift through advice, retaining what aligns with their vision and customer needs.
• The YC environment provides a wealth of advice, but founders must discern which guidance to follow.

"Huge. I drink the YC Kool Aid. I had so much admiration along the way after having met so many YC founders, just the level of care and concern that YC really has for founders."

The quote reflects the founder's positive experience with YC and underscores the importance of the support and guidance YC offers to its founders.

• Early-stage valuation can be a less significant factor compared to the potential for a company to become enormous.
• Founders should prioritize investor-founder relationship quality over valuation during fundraising.
• An investor's behavior during the pitch can be indicative of the future working relationship.
• Lower valuations can be acceptable if the investor brings more value to the relationship.

"What a lot of founders forget is that you put somebody on your board, you have an investor that you really want to have this really deep connection with and close conversation with all the time because they're going to be there through all the ups and downs."

The quote emphasizes the importance of the investor-founder relationship and the need for mutual trust and support, which can outweigh the benefits of a higher valuation.

• There is concern about the trend of rapid fundraising processes that prioritize efficiency over relationship building.
• Choosing board members and long-term partners based on brief interactions and high valuations may be risky.
• The importance of understanding and vetting potential investors is highlighted.

"It's this kind of efficiency around fundraising processes where it's like, we'll do two weeks, we'll meet every investor in these two weeks, and then we will choose the term sheets."

The quote criticizes the fast-paced fundraising culture that may lead founders to make hasty decisions about their investors, which can have long-term implications for their company.

• Founders should be prepared and organized before starting to fundraise.
• Building relationships with partners and investors is crucial before the actual fundraising begins.
• Continuously building fundraising relationships is more effective than switching between fundraising and non-fundraising modes.
• Investors are professionals and should be ready to participate in the founder's fundraising process.
• A well-informed investor can make a quicker and more informed decision, leading to a faster yes or no.

"You may have love at first sight with an investor, and that's okay, but you still want to do your diligence, right?"

This quote emphasizes the importance of due diligence even when a founder feels an immediate connection with an investor. The analogy to romantic relationships underlines that a good first impression should still be followed by a thorough evaluation process.

"A lot of the common pitfalls that I like to talk about are just preparedness, like not having your shit together as you're getting ready to fundraise."

John Dishotsky highlights a common mistake founders make: not being prepared for fundraising. The lack of preparedness can hinder the fundraising process and reduce the chances of success.

"I think you should just always be building fundraising relationships and then you're in fundraising mode."

John Dishotsky suggests that founders should always be cultivating relationships with potential investors, rather than only doing so during a fundraising period. This approach can lead to better relationships and more successful fundraising outcomes.

• Mental health is often neglected by founders in the pursuit of building a successful startup.
• Founders should prioritize their mental and physical health for their well-being and the company's benefit.
• Taking care of oneself has a positive cascading effect on the team and company culture.
• Neglecting personal health can lead to negative consequences for both the founder and their company.
• Founders should seek mental health support, practice gratitude, and find a balance between work and personal life.

"So what you have to do is actually reprioritize yourself as number one."

John Dishotsky advises founders to prioritize their own well-being, as it directly impacts their performance and the company's atmosphere. Self-care is not selfish but necessary for sustainable success.

"You've got to find your sort of mental health coaches."

John Dishotsky suggests that founders should seek out mental health support, such as therapy, and view it as a form of mental exercise. This support is crucial for maintaining a healthy mindset.

"Starting with gratitude, and I know Justin Khan talks about this very publicly, and I really appreciate that, is saying that you have a choice every day to be really grateful."

John Dishotsky recommends practicing daily gratitude as a way to maintain a positive outlook. This habit can help founders stay grounded and appreciative amidst the challenges of entrepreneurship.

• There are different perspectives on whether being a younger or older founder is advantageous.
• Older founders may benefit from life experiences that provide emotional stability and a team-oriented approach.
• Family life can offer a healthy work-life balance and a mental reset for founders.
• Younger founders may be more ego-driven and emotionally reactive, while older founders may approach problems with more humility and less ego.

"I'm glad you said seasoning, because food is terrible without seasoning."

John Dishotsky uses the metaphor of seasoning to suggest that age and experience add value to a founder's capabilities, just as seasoning enhances the flavor of food.

"And so as a mid 30s founder, I look at problems in sort of a less ego driven way and more of a team approach."

John Dishotsky reflects on how his perspective on problem-solving has evolved with age. He now focuses on a collaborative team approach rather than being driven by ego.

• Recognizing vulnerability as a strength, not a weakness.
• Vulnerability facilitates honest feedback and truthfulness within the company.
• Maturity and experience contribute to understanding and embracing vulnerability.

That vulnerability actually helps with feedback and people in your company and things like that. Be a little bit more honest and truthful.

This quote highlights how vulnerability can positively impact internal company dynamics by encouraging honesty and open feedback, which are crucial for a healthy work environment.

• Seasoned entrepreneurs often perform better statistically.
• Experience provides tools and perspectives that may not be present right out of college.
• Maturity can reduce ego-driven decisions and enhance leadership qualities.

The seasoned guys and gals are actually better performers in many cases.

This quote underscores the statistical evidence that suggests entrepreneurs with more life and work experience tend to have better performance outcomes in their ventures.

• Trusting one's gut feeling is an undervalued tool in business.
• Competency, culture fit, and chemistry are key factors when choosing investors or hiring.
• Avoiding people who make you feel uncomfortable should also apply in business settings.

Chemistry is extremely important and people just forget about it.

The quote emphasizes the critical role of chemistry in forming and maintaining business relationships, suggesting that it should be as much a consideration as competency and cultural fit.

• Advocating for more female founders and venture capitalists.
• Emphasizing the need for diversity and inclusion.
• Highlighting the importance of mental health discussions in the tech industry.

More female founders, more female vcs, more diversity, inclusion, and then also more conversations around mental health.

John Dishotsky calls for increased representation of women in founding and funding roles, as well as greater attention to diversity and mental health within the Silicon Valley tech community.

• Criticism of the transactional nature of fundraising.
• The importance of building long-term relationships with investors.
• Relationships should not be rushed and require more time than a fundraising cycle.

I just don't think that that can, like you said, happen in two or three weeks. I think it's building a long term relationship.

The quote criticizes the common fundraising approach and suggests that meaningful connections with investors take time to develop and cannot be condensed into a short period.

• Aspiration to make cities more affordable and accessible.
• Star City aims to be a globally recognized brand for urban accessibility.
• The vision includes building communities and software to enhance the customer experience of moving to a new city.

We would love to be the globally recognized brand for people getting that foot in the door in the best cities in the world.

This quote encapsulates Star City's ambition to become synonymous with making it easier for people to move to and live in major cities, thereby fostering hope and opportunity.

• Personal challenges such as sleep training a child.
• Disagreement with common advice on fundraising and relationship building.
• Future goals for Star City and its potential impact on accessibility to cities.

Well, we're sleep training my daughter again, and so that's a wild ride for any fathers and mothers out there.

John Dishotsky shares a personal anecdote about sleep training his daughter, which serves as a reminder of the human aspects and challenges faced by entrepreneurs outside of their business lives.