In a candid conversation on "20 VC," host Harry Stebbings and seasoned Israeli investor Adam Fisher, a partner at Bessemer Venture Partners, delve into the nuances of venture investing and startup growth. Fisher, known for his impressive track record of over 60 investments and 23 exits, shares insights on the pitfalls of chasing the fastest-growing companies, emphasizing the value of patience and the disproportionate returns often realized in the final stages of a company's journey. He advises fellow investors to aim for base hits rather than home runs, underscoring the importance of recognizing when a company has peaked and the strategic timing of exits. The discussion also touches on the evolving landscape of the Israeli tech ecosystem, the perils of overfunding, and the delicate balance between being an assertive and supportive board member. Fisher's approach to investing is shaped by a blend of risk aversion, experience, and a keen sense of timing, advocating for a measured strategy that prioritizes sustainable growth and long-term vision over short-term hype.
"I don't think that the way you build a big company or the way you get a big exit is by investing in the most ambitious companies growing the fastest. Those are also the companies that crash and burn."
The quote explains Adam Fisher's view that rapid growth does not guarantee a successful investment, and that companies with fast growth can also fail dramatically. It challenges the common perception that high-speed growth is always desirable in investments.
"This is 20 vc with me, Harry Stebbings and I started 20 VC nine years and 2700 episodes ago because I wanted to be the best investor in venture and I wanted to learn from the best."
Harry Stebbings shares the motivation behind starting his podcast, highlighting his desire to improve as an investor by learning from successful figures in the venture capital space.
"So it was serendipitous. I was a student at the time... And somebody pulled out... it was for a venture capital fund."
Adam Fisher recounts the unexpected opportunity that led him to venture capital, illustrating how chance encounters can shape a career path.
"I worked back then at a time where it was a much more adversarial relationship with entrepreneurs."
This quote highlights the evolution of the relationship between investors and entrepreneurs, from adversarial to more collaborative, and Adam Fisher's preference for the latter.
"There's something about the speed that is not fair. It's literally speed dating."
The quote emphasizes the problematic nature of making quick investment decisions without adequate time to understand the company and its founders.
"I actually love first time entrepreneurs. The key for looking at first time entrepreneurs is identifying somebody that you have chemistry with."
Adam Fisher expresses his appreciation for first-time entrepreneurs who are willing to learn and develop a strong working relationship with their investors.
"I like the outsider approach. It's common to Israel because Israelis typically are coming from outside."
The quote reflects Adam Fisher's preference for entrepreneurs who approach markets as outsiders, which is common in the Israeli entrepreneurial ecosystem.
"I think from the get go, if you're talking about creating a category, you're making a mistake."
This quote conveys Adam Fisher's view that entrepreneurs should not set out with the primary goal of creating a new category, as this often occurs organically and involves multiple contributors.
"I think there's two types of investors out there. There are those that get comfortable when there's competition... But I'm the other type."
The quote reflects Adam Fisher's contrarian stance, favoring unique investment opportunities over those with substantial competition.## Fundraising and Investor Strategy
"It's a combination of the entrepreneur, the CEO in this case. Will they be able to raise money? I invest in people who I think can raise money even when they don't meet their plan."
The quote highlights the importance Adam places on the entrepreneur's ability to secure funding, emphasizing that this skill is a significant factor in his investment decisions.
"You can't just raise on a story. You have to have some execution behind it."
Adam explains that while storytelling is important, it must be supported by tangible execution and results to be a valid investment opportunity.
"If they've already established the company, yes, I'd like to know who made the first sales. I would actually expect the CEO to have made the first sales."
Adam uses this quote to illustrate the importance of founders being directly involved in the initial sales, which is an indicator of their commitment and efficiency.
"The ones that show an entrepreneurial streak in their background, they generally are entrepreneurs."
Adam acknowledges that an entrepreneurial spirit in one's history can be a strong predictor of future entrepreneurship, but he remains open to those without such a background.
"I personally like to invest in smaller markets for two reasons."
Adam explains his preference for smaller markets, highlighting the lack of competition and the potential for successful exits with proper valuation.
"Some of my smallest investments ended up being my biggest outcomes."
This quote emphasizes Adam's experience that significant returns can come from small initial investments, supporting his strategy of focusing on the quality of the investment rather than its potential size.
"The underlying thesis was completely wrong and I really learned my lesson."
Adam shares a personal anecdote of a failed investment to illustrate the importance of learning from mistakes and refining investment strategies accordingly.
"The best thing about patent recognition over time is that you recognize what won't work."
Adam explains that through experience, he has learned to identify strategies and behaviors that are likely to fail, which is a valuable skill in guiding entrepreneurs.
"We're like the lighthouse. We just tell them where the rocks are so they don't crash."
Adam uses the lighthouse metaphor to describe the advisory role of investors and board members, emphasizing their function in risk avoidance.
"I'm much more interested in not making a mistake with a hire than making sure that this is the best possible candidate we could hire."
Adam expresses his approach to hiring, prioritizing the avoidance of bad hires over the pursuit of the perfect candidate.## Experience in Hiring
"That's one of the greatest skills of second time entrepreneurs, is that they actually don't even need me to interview any of the candidates. Typically they move so fast."
The quote highlights that experienced entrepreneurs have a refined ability to hire effectively and efficiently, often bypassing the need for investor involvement in the hiring process.
"Honestly, it's such a different world now in terms of infrastructure, in terms of stack, having operator experience. Technically speaking, then I don't think it makes a huge difference to versus now because it's so different. But people always stay the same. And actually the ability to detect talent, hire, maintain talent, retain talent, that's always the same."
This quote emphasizes that while technology may evolve, the core aspects of human resource management and talent acquisition remain consistent across time.
"But also knowing yourself as a manager or leader, everybody's different. And the more experience you have having been in that situation, the better you are about hiring the people that are a good match for you."
The quote underlines the importance of self-awareness in leadership and its impact on hiring practices that align with the leader's style.
"I see my role as a VC as picking up an entrepreneur, when they're like on the ground because of some kind of disappointment or challenge, but also pulling them down when their heads in the clouds, when they get too giddy about some recent success or about the recent valuation or some interest from an acquirer."
This quote discusses the VC's role in providing balanced support to entrepreneurs, helping them through both successes and setbacks.
"Rarely have I turned down deals in the very early stages due to price alone. That price is often a function of raising too much money."
The quote explains that for early-stage investments, the valuation is not the primary deterrent; instead, it's the concern over the excessive amount of capital being raised without a clear plan.
"Much more problematic, again, are valuations that are essentially in exit territory or far in excess of exit territory. It's really hard to recover from that."
This quote highlights the dangers of companies being overvalued, which can be more detrimental than experiencing downrounds.
"I think it distorts everything. I think you create everything from the go to market model, to how you hire, to the offices and the culture you're creating, it's all wrong."
The quote addresses the negative impacts of raising too much capital too early, which can lead to a distorted approach to building a company.
"Since AI has become what it is, I've run the other way. The simple reason that I just can't make sense of the competition."
The quote explains the decision to avoid mainstream AI investments due to the high level of competition and the preference for clearer opportunities.
"It's been companies that require patience and that over time, figure it out and surprise everybody out of nowhere."
This quote describes the investment philosophy of focusing on companies that may not be immediately recognized as market leaders but have the potential for steady growth and success over time.
"There's no question that at the end of the day, most of your returns are going to come from very few deals."
This quote acknowledges the reality that a small number of investments typically generate the majority of returns in venture capital.
"I worry more about losing on those types of investments than having missed an opportunity to make a bit more money."
The quote reflects the cautious approach to investing, valuing the preservation of capital over the potential for higher, but riskier, returns.
"I think for later stage investors there's misalignment, especially when founders start to sell secondary."
This quote points out the differing priorities and perspectives between founders and later-stage investors, leading to potential conflicts of interest.## Investor Expectations and Founder Responsibilities
"I think if I was, I would tell the entrepreneur to ignore them and to figure out, to tell them why they need to be patient and why you still appreciate them as an investor and understand that it might not be the outcome that they had hoped for."
This quote emphasizes the need for founders to manage investor expectations, especially when the desired outcomes are not immediately achievable.
"I think there will be. I think it's just a matter of price and matching it."
Adam Fisher indicates that liquidity opportunities exist, but they depend on finding the right price point and matching buyer and seller expectations.
"If it's peaked, I'm already probably it's too late."
This quote reflects Adam Fisher's strategy of selling before a company's growth peaks, as waiting too long can diminish the exit value.
"They're going to acquire you."
Adam Fisher points out that acquirers are often interested in the founder as much as the company, which can lead to surprisingly good offers even for smaller companies.
"If you're going to have an independent mind and live in a place that's free, if you don't feel comfortable expressing it, then it's just not worth that much."
This quote highlights the importance Adam Fisher places on the freedom of expression and the value of having an independent mind.
"I'm usually the kind of person who says that I am pessimistic about the short term but optimistic about the long term."
Adam Fisher explains his typical investment outlook and how his perspective has recently inverted.
"It's probably that they're all techies and they're all in cybersecurity, which is just not the case."
Adam Fisher addresses the misconception that Israeli startups are predominantly tech-focused, highlighting the diversity within the ecosystem.
"I would say there are two pieces of advice which are contrary."
Adam Fisher discusses the contrasting pieces of advice he has received, reflecting on the balance between cutting losses and being patient for potential late-stage value creation.
"You learn them too late to make them truly valuable to yourself. And so the best thing you can do is then try and give it to younger people."
This quote captures Adam Fisher's desire to mentor the next generation, sharing insights that may have come too late in his own career but could benefit others earlier in theirs.