20VC Science Inc's Peter Pham on Why The Battle Between Entrepreneurs & VCs Is Unfair, How To Even The Playing Field & How To Tell When A VC Really Is Interested

In this episode of the 20 Minutes VC, host Harry Stebbings interviews Peter Fam, co-founder of Science, a startup studio with notable successes like Dollar Shave Club. Fam discusses his journey from leading Photobucket to its $300 million acquisition to co-founding Bill Shrink, eventually leading to the inception of Science in LA. He shares insights on the fundraising process, emphasizing the importance of understanding VCs' perspectives and the need for startups to optimize time and resources during fundraising. Fam candidly talks about dealing with rejections, the significance of having conviction in one's company, and the strategic use of data for scaling businesses effectively. He also highlights the role of network effects and the need to focus on internal metrics before scaling efforts. Additionally, Fam touches on the future vision for Science, aiming to build impactful companies with passionate founders, and expresses excitement about Handstand, a promising company in their portfolio.

• Harry Stebings introduces the podcast "20 Minutes VC" and guest Peter Fam, co-founder of Science.
• Science is a startup studio that incubates companies and has had notable successes such as Dollar Shave Club and Wishbone.
• Peter Fam has a background in leading companies to successful acquisitions, including Photobucket and Bill Shrink.
• Harry mentions the ease of their conversation, highlighting the length of the call and his enjoyment of the show.
• An advertisement for Eve mattresses is included, promoting better sleep with their product.

"I'm your host Harry Stebings at H stepbings on Snapchat, and you're listening to the 20 Minutes VC. Now for the show today, I'm thrilled to welcome Peter Fam."

This quote introduces the podcast and Peter Fam as the guest, setting the stage for the discussion.

"Science created one of the top hundred iOS apps called Wishbone, and Peter's also helped his portfolio raise a staggering $350,000,000 in that time."

This quote highlights the achievements of Peter Fam and Science, indicating the success of their incubated companies.

• Peter Fam details his professional journey, starting with enterprise sales and moving into consumer Internet with Photobucket.
• His expertise in user acquisition and business development led to Photobucket's growth and $300 million acquisition.
• Fam's relationship with Mike Jones, co-founder of Science, began through their mutual involvement in the early social media space.
• They shared a vision to build multiple companies, influenced by their experiences in technology and venture capital.
• Fam's tenure as an Entrepreneur in Residence (EIR) at Trinity Ventures gave him insights into venture needs and the desire to be hands-on with startups.
• Science was founded in LA, with a focus on being deeply involved with startups rather than just providing capital.

"Mike Jones and I have known each other for quite some time... I actually did enterprise sales... There was a company called Photobucket based out of Denver... I joined and kind of ran everything except for engineering."

This quote provides background on Peter Fam's entry into the consumer Internet space and his role in growing Photobucket.

"Fast forward. I was CEO, co-founder of a company called Bill Shrink... I eired at Trinity Ventures twice... I knew I wanted to help companies build and I knew I wanted to be more hands on."

This quote explains Fam's experience as an EIR and his motivation to co-found Science to more actively support startups.

• Science operates as a studio, not an accelerator, providing extensive support and resources to CEOs of startups.
• The studio offers a 26,000 square foot office where CEOs work alongside the Science team.
• Science focuses on daily engagement with startups, providing analytics, growth marketing, design, and engineering support.
• Mike Jones handles product development, leveraging his expertise to guide startups toward growth and revenue.
• Peter Fam splits his time between managing platforms, business development, and fundraising for their companies.

"We're not an accelerator, we are not a Y combinator... We have a 26,000 square foot office. All of our CEOs start in our offices, take a desk and work with us side by side."

This quote describes the operational model of Science, emphasizing their hands-on approach with startups.

"Mike is product, right? He's probably one of the best product people I've ever met... I spend my time kind of split between managing platforms and business development for our companies and then fundraising."

This quote outlines the division of responsibilities between Peter Fam and Mike Jones at Science, highlighting their areas of expertise.

• Peter Fam believes there is an imbalance in the fundraising process between entrepreneurs and venture capitalists (VCs).
• His strategy involves being the frontline for fundraising, leveraging his understanding of the VC perspective to support their startups.
• Fam emphasizes the importance of presenting companies in a way that resonates with venture capitalists.

"So my approach is that always, I think it's unfair, I think in the battle of entrepreneurs to VCs to get money... Entrepreneur especially first time, they've never raised... I like to even the playing field."

This quote reveals Peter Fam's view on the challenges entrepreneurs face during fundraising and his commitment to supporting them through the process.

• Entrepreneurs face numerous rejections when seeking investment, with significantly more "no's" than "yeses."
• Persistence in fundraising can lead to substantial capital raised and successful exits, as evidenced by the Dollar Shave Club billion-dollar exit.
• Startups must be efficient with their time and resources, as wasting time can be detrimental to their progress.
• The venture capital landscape has grown, offering more potential investors but also increasing the challenge of identifying the right ones to approach.

"I think I'm at 3000 plus no's, right. And what counts is the 83 yeses that we've had and 350,000,000 raised against the portfolio."

This quote emphasizes the speaker's experience with a high volume of rejections juxtaposed against the successes achieved through perseverance in fundraising.

"Startups have two things. They have time and money. And if you're wasting a day, that's a big deal. If you're wasting a week, it's a huge deal."

The quote highlights the critical importance of time management for startups, where even a single day's delay can have significant consequences.

• Entrepreneurs can optimize their fundraising efforts by pre-pitching and identifying the right investors to approach.
• The role of a guide in the fundraising process can be crucial, helping to ensure fair exchanges of information and aiding CEOs in meetings.
• Framing questions and answers effectively is a common struggle for entrepreneurs during pitches.
• Understanding the true meaning of a "no" from investors can save entrepreneurs time and prevent false hope.

"I pre pitch, I figure out who to talk to. In a lot of cases, I'm doing the first phone call and then generally I'm shadowing the CEO that's both on phone calls and in person in the meetings."

This quote explains the speaker's strategy of preparing and guiding entrepreneurs through the initial stages of investor engagement to optimize their chances of success.

"I think the framing of questions and how it's answered is without repetition."

The speaker identifies a key issue in how entrepreneurs respond to investor questions, suggesting that effective communication is essential for a successful pitch.

• A genuine interest from investors is characterized by immediate follow-up and a sense of urgency.
• Entrepreneurs should be wary of "optionality" or non-committal responses from investors, which often indicate a lack of genuine interest.
• The "24 hours rule" suggests that any form of engagement within a day can be a positive sign, whereas lack of engagement likely means disinterest.
• Even top partners at venture firms need to sell the investment to their colleagues, so entrepreneurs should help frame the opportunity in a way that facilitates this process.

"It all generally is the same, which is if someone's interested, they're interested."

This quote simplifies the fundraising process by stating that genuine investor interest is straightforward and will be followed by immediate action.

"Are they asking for information so that they can sell to their partnership?"

The speaker highlights the importance of investors requesting information as a sign that they are considering advocating for the investment to their partners.

• Continuous rejection can be psychologically challenging, but it can also motivate entrepreneurs to prove doubters wrong.
• Entrepreneurs need to have conviction in their ventures, which is reinforced through daily involvement and substantial data.
• The venture capital evaluation process can be brief compared to the months of work entrepreneurs put into their companies.
• Being right and proving skeptics wrong can be a driving force for entrepreneurs and their teams.

"I used to do in enterprise sales, I used to do like 100 cold calls a day to ctos and directive. It gets to you a little bit particularly."

The speaker reflects on past experiences with rejection, acknowledging its emotional impact but also implying the resilience developed over time.

"I have so much. Obviously we have conviction, otherwise we would have shut it down already."

This quote stresses the deep commitment and belief that entrepreneurs must have in their projects, which is essential to persist through the fundraising process.

• Rejection is a common experience for founders when dealing with VCs.
• The playing field is uneven as VCs are experienced in rejecting pitches, whereas founders may not be used to being rejected.
• Founders are deeply committed to their companies, often spending years nurturing their ideas.
• Rejection from respected VCs can be particularly disheartening for founders.
• Preparing founders for rejection involves being critical and building resilience.

"We do have our convictions. And when we have our convictions. Yeah. Does it bug me? Sure. But I have to get over it, knowing that I'm going to have to go back to the same VC probably next week."

This quote emphasizes the need to maintain professional relationships with VCs despite facing rejections, as future interactions are likely.

"And for them to get 20 no's, 30 no's on their dream. And from really smart people that they've probably looked up to, right, they read about, they know that investor invested in so so company, and they imagine this person that they're sitting across is, they're impressed and they're smarter than me. And wow, they're telling me it's a shitty business."

This quote highlights the emotional toll that rejection can take on founders, especially when it comes from investors they admire.

• The coaching process for founders is rigorous and can be perceived as harsh.
• Founders are guided on the nuances of pitching, including what to say and how to act.
• The goal is to refine the founder's story and make it compelling within a limited timeframe.
• It's important for founders to seek investors who are passionate about their business.
• Rejection can be positive if it means finding investors who will actively support and think about the company.

"Preparing them for the no's actually is pretty hard. And I do that by being really hard on them early."

This quote indicates that preparing founders for rejection involves tough love to build their resilience and improve their pitch.

"No's just means they're not into you. I want fundamentally investors that are passionate about the business."

This quote explains that a 'no' from an investor is not necessarily a reflection of the business's quality, but rather a lack of alignment or passion from that particular investor.

• Science is a startup studio that co-builds companies, which means they are selective about the projects they take on.
• Saying no is part of the process and is done with the intention of being helpful.
• Rejections are based on whether the team believes they can be impactful and think about the project daily.
• The goal is to ensure that companies they work with can say that Science fundamentally changed their trajectory.

"I think we try to be helpful in the sense that I think we can always give people tactical advice, right?"

This quote illustrates that even when saying no, there is an effort to provide constructive feedback.

"We have to say no, because I'm doing disservice for the company."

This quote explains that saying no is sometimes necessary to avoid wasting time on a project that the team cannot fully support.

• Science was conservative in its approach to scaling four and a half years ago.
• Understanding internal metrics and KPIs is crucial for scaling effectively.
• Focusing on conversions, retention, and lifetime value (LTV) is more important than gross merchandise value (GMV) in early stages.
• There is a misconception that customer acquisition is linear, which is not true.
• Companies need to find the bounds of their growth strategies and the costs associated with them.
• Saturating a market requires exploring various channels, including paid media.
• Improving conversion rates within the funnel before scaling efforts can have a multiplier effect on growth.

"The scaling of it is the metrics being early realizing like we need to get from point a to point b as a company as fast as we can and b scale or kind of a zero."

This quote emphasizes the importance of focusing on key metrics to scale quickly and efficiently.

"Make the before you dump everything at the top, whether it be big viral tactics or big advertising or big pr stunts, whatever it is, you're wasting all of that effort if you're not focused on that tight funnel of conversion."

This quote advises that before investing heavily in top-funnel activities, companies should optimize their conversion processes to ensure the best use of resources.

• Peter acknowledges only having read one book multiple times, "How to Win Friends and Influence People" by Dale Carnegie.
• Despite taking Dale Carnegie classes, Peter still feels he is not proficient at influencing people.
• Peter's statement suggests a recognition of the importance of Carnegie's principles in his personal development.

I don't read books. There's one book my brother gave me when I was 18 years old. It's Dale Carnegie, how to win friends and influence other people. I've read it seven, eight times. I've actually even taken two Dale Carnegie classes and I'm still bad at it.

This quote indicates the significant impact of Dale Carnegie's book on Peter's life, highlighting his continuous effort to improve his interpersonal skills, despite self-perceived shortcomings.

• The success of Dollar Shave Club has positively affected the reputation of Peter's firm in the industry.
• The perception of increased intelligence and vision within the firm is noted, despite no change in the team's capabilities.
• The firm's thesis on the importance of understanding customer identity and leveraging the social web for brand growth is validated.
• An increase in investor interest and response time is observed post the Dollar Shave Club event.

It's been three weeks, which is funny because news cycles change so fast. But I think the combination of dollar shave club for us and jet.com for the e-commerce industry definitely has a bigger effect. Everyone thinks we're smarter now.

This quote reflects on how recent successes, such as the Dollar Shave Club deal, have led to a shift in industry perception, suggesting a newfound respect and credibility for Peter's firm.

• Peter's company, Science, revolves around building companies with exceptional founders.
• Personal joy is derived from witnessing the growth and success of CEOs and their teams.
• The company opposes the concept of "value add" as it focuses on hands-on company building.
• Science's studio model is unique and aims to prove the value of collaborative smart people in building businesses.

We have thesis every couple of years and our vision is to build amazing companies with amazing founders.

The quote encapsulates the core vision of Science, which is to create successful companies by working closely with talented founders.

• Peter has been diagnosed with ADHD and uses medication (Vivance) to improve focus.
• He enjoys the dynamic nature of his work, which requires frequent context switching.
• Focus for Peter is ensuring a positive and impactful experience for CEOs, regardless of the company's financial outcome.

Apparently I got diagnosed with ADHD in January... Now I absolutely know what focus is.

This quote reveals Peter's personal challenge with focus, which he has addressed with medical help, leading to a better understanding of what true focus feels like for him.

• Dan Primack's Fortune newsletter is a valuable resource for Peter, providing deal summaries and venture capital insights.
• Peter assesses the dynamics of venture partners, including their recent successes, losses, and influence within their firms.
• Recode is a favored blog for staying informed on tech and the digital industry.

Dan Premac Fortune newsletter is awesome just because it's a quick summary of every deal that gets done, every company that gets funded, every vc.

The importance of staying informed about industry deals and venture capital dynamics is highlighted in this quote, with the Fortune newsletter serving as a key resource for Peter.

• Handstand, a company within Science, is creating buzz for its on-demand fitness trainer platform.
• CEO Tiffany's resilience and hustle are praised, with a successful partnership with Reebok and an upcoming rollout.
• Peter expresses high expectations for Tiffany's future success and the growth of Handstand.

Handstand is... Yeah, that's the one... Her hustle is unlike anybody else we've seen, and her wanting to win is at the extreme level I've ever seen.

Peter's enthusiasm for Handstand and its CEO, Tiffany, is evident, indicating a strong belief in the company's potential and leadership.

• Peter expresses gratitude for the interview and extends an invitation to visit in Santa Monica.
• The host, Harry Stebings, reciprocates the appreciation and mentions his social media and newsletter for the audience to follow.
• The host also promotes Eve mattresses, emphasizing the importance of a good night's sleep for a better world.

Come visit. We're in Santa Monica. We're at 75 degrees.

This quote serves as a friendly closing remark from Peter, showcasing hospitality and a warm welcome to his location in Santa Monica.