Einar Vollset

Yeah, and I think, you know, I think like, I know for a fact, that's sort of what YC, you know, partly why YC started. It's like, because it was, it used to be kind of like, how do you, how do you get access to this? It's like, and it was like, oh, you know, my dad plays golf with this lawyer who can get you an intro and then you can get like, but like.

Yeah, and I think, you know, I think like, I know for a fact, that's sort of what YC, you know, partly why YC started. It's like, because it was, it used to be kind of like, how do you, how do you get access to this? It's like, and it was like, oh, you know, my dad plays golf with this lawyer who can get you an intro and then you can get like, but like.

I think in part, that's why, like, you know, VC started out so geographic and remain to this day so geographically concentrated because sort of what it was like, like you'd get everyone was sort of there and you had to kind of be there. You had to be in Silicon Valley in order to get money. And like you had to have those connections and be able to work a warm intro.

I think in part, that's why, like, you know, VC started out so geographic and remain to this day so geographically concentrated because sort of what it was like, like you'd get everyone was sort of there and you had to kind of be there. You had to be in Silicon Valley in order to get money. And like you had to have those connections and be able to work a warm intro.

I mean, that's still the case for the cases people like, you know, figure out a way to get an intro to me. That's turtle number one kind of thing. So for sure, that's that's been that's been part of it.

I mean, that's still the case for the cases people like, you know, figure out a way to get an intro to me. That's turtle number one kind of thing. So for sure, that's that's been that's been part of it.

Well, I mean, there's a couple of different things here. And actually, like a billion, to a degree, like a billion dollars is apparently too small even in some cases. Like there was actually, I think it was Sam Altman who wrote a piece, you know, Mr. OpenAI, but used to be president of YC. He wrote a piece, How to Invest in Startups. And I think that was like 2018, 2016, something like that.

Well, I mean, there's a couple of different things here. And actually, like a billion, to a degree, like a billion dollars is apparently too small even in some cases. Like there was actually, I think it was Sam Altman who wrote a piece, you know, Mr. OpenAI, but used to be president of YC. He wrote a piece, How to Invest in Startups. And I think that was like 2018, 2016, something like that.

And his main point in that article, which I still think is up, was, you know, you shouldn't invest in anything Unless it can be $20 billion or more. Like, you know, just don't even waste your time unless you think it can be a $20 billion exit. And, like, I mean, that article was in part the reason why, like, TinySeed became a thing. Because, like... That's crazy. It is.

And his main point in that article, which I still think is up, was, you know, you shouldn't invest in anything Unless it can be $20 billion or more. Like, you know, just don't even waste your time unless you think it can be a $20 billion exit. And, like, I mean, that article was in part the reason why, like, TinySeed became a thing. Because, like... That's crazy. It is.

You know, that's that, like, I get it. Like he's, he's talking his own book at the time, you know, like that totally makes sense. Like if you're, if you have a lot of, if you have a lot of AUM, a lot of money to put on, you know, like, and you're, you're writing big checks and big outcomes and this is where you're To a degree, like, okay, it doesn't matter. Like, entry price doesn't matter.

You know, that's that, like, I get it. Like he's, he's talking his own book at the time, you know, like that totally makes sense. Like if you're, if you have a lot of, if you have a lot of AUM, a lot of money to put on, you know, like, and you're, you're writing big checks and big outcomes and this is where you're To a degree, like, okay, it doesn't matter. Like, entry price doesn't matter.

Valuation doesn't matter. Like, you just got to find that thing that goes to $20 billion, right? That's the whole game. And while that's true, like, if you're playing that game, then that's how you should be playing that game. Effectively, our argument was like, look. There's got to be a way in which founders and investors can both succeed where outcomes are not quite $20 billion.

Valuation doesn't matter. Like, you just got to find that thing that goes to $20 billion, right? That's the whole game. And while that's true, like, if you're playing that game, then that's how you should be playing that game. Effectively, our argument was like, look. There's got to be a way in which founders and investors can both succeed where outcomes are not quite $20 billion.

You know, like I think most of the people, you know, listening to this would agree that like a $75 million or $100 million exit, even if it's like selling to some lowly private equity fund. That's pretty good.

You know, like I think most of the people, you know, listening to this would agree that like a $75 million or $100 million exit, even if it's like selling to some lowly private equity fund. That's pretty good.

I think a lot of people listening to this will think to themselves, yeah, if I owned 80, 90% of a company and sold for $75 million, I'd be having a pretty good Christmas right about now, if that's what was happening. And so effectively, what we're thinking with TinySeed is like, look, there's got to be a way where you can have that be success and everybody makes out well.

I think a lot of people listening to this will think to themselves, yeah, if I owned 80, 90% of a company and sold for $75 million, I'd be having a pretty good Christmas right about now, if that's what was happening. And so effectively, what we're thinking with TinySeed is like, look, there's got to be a way where you can have that be success and everybody makes out well.

And that's sort of the ground thinking on the investing side for TinySeed is like, how do we make that happen? And really what that boils down to is a couple of different things. Like one is I don't think it works for every single industry, every kind of product, every kind of service. Like there's just some things that are just requires a lot of capital, is extremely capital intensive.

And that's sort of the ground thinking on the investing side for TinySeed is like, how do we make that happen? And really what that boils down to is a couple of different things. Like one is I don't think it works for every single industry, every kind of product, every kind of service. Like there's just some things that are just requires a lot of capital, is extremely capital intensive.

You know, like it makes total sense to keep raising money. And like if you keep raising money and burning money, then like the sort of winner take all stuff makes total sense here. Like your Airbnbs, your hell, you like your new open AI stuff, right? Like it makes total sense. I'm going to raise money.

You know, like it makes total sense to keep raising money. And like if you keep raising money and burning money, then like the sort of winner take all stuff makes total sense here. Like your Airbnbs, your hell, you like your new open AI stuff, right? Like it makes total sense. I'm going to raise money.

gazillion a trillion dollars and it is whatever and even some of the smaller stuff is like look my standard thing is like look if you're going to do like a home grooming startup service type thing that it's got it's got to be capital intensive like it's like an uber you you got to spend money on it and like you're going to get diluted you know up the wazoo and you have to gun for an enormous outfit to make any money but like what we realized is like okay but there is this subset of specifically b2b sass where like it can work because for a

gazillion a trillion dollars and it is whatever and even some of the smaller stuff is like look my standard thing is like look if you're going to do like a home grooming startup service type thing that it's got it's got to be capital intensive like it's like an uber you you got to spend money on it and like you're going to get diluted you know up the wazoo and you have to gun for an enormous outfit to make any money but like what we realized is like okay but there is this subset of specifically b2b sass where like it can work because for a

Yeah, a lot of the time. Because like the gross margins are like, you know, 95%. That's not unusual. And quite often on the discretion side, I talk to founders and they're like, yeah, do you think I'm profitable enough? I got 65% free cash flow.

Yeah, a lot of the time. Because like the gross margins are like, you know, 95%. That's not unusual. And quite often on the discretion side, I talk to founders and they're like, yeah, do you think I'm profitable enough? I got 65% free cash flow.

Yeah, like expanding revenue. And it's like, it's crazy. I mean, like you even see this in some of the like go public companies like Zoom. And I think Zoom actually is the sort of poster boy for this. You know, the Zoom, I think they went public with more money in the bank than they raised.

Yeah, like expanding revenue. And it's like, it's crazy. I mean, like you even see this in some of the like go public companies like Zoom. And I think Zoom actually is the sort of poster boy for this. You know, the Zoom, I think they went public with more money in the bank than they raised.

Yeah. And that's sort of like what B2B SaaS is like. And so I think it works for that. And in a sense that like there is this notion that it basically, like if you take a little bit of money once and then you don't need to raise anymore. You can if you want to, but you don't need to. And so that's what works for tiny seed or mostly bootstrap or tiny seed like companies.

Yeah. And that's sort of like what B2B SaaS is like. And so I think it works for that. And in a sense that like there is this notion that it basically, like if you take a little bit of money once and then you don't need to raise anymore. You can if you want to, but you don't need to. And so that's what works for tiny seed or mostly bootstrap or tiny seed like companies.

And like if you combine that then with what we consider to be reasonable valuation. So So I think, like, if you're playing the classic VC game, $20 billion a bus, yeah, you're right. It doesn't matter that you're paying $25 million for a pre-revenue product at YC Demo Day as a seed investor. It's fine. Like, who cares?

And like if you combine that then with what we consider to be reasonable valuation. So So I think, like, if you're playing the classic VC game, $20 billion a bus, yeah, you're right. It doesn't matter that you're paying $25 million for a pre-revenue product at YC Demo Day as a seed investor. It's fine. Like, who cares?

Like, if you could invest at $25 million valuation into OpenAI or Airbnb, then great investment. Go do it. But... 25 million, say, and then it goes to a billion dollars. Let's just say that rather than 20. Let's be a little less ambitious than Mr. Altman was. That's a 40x return on your money. That's a good return. That's a great return.

Like, if you could invest at $25 million valuation into OpenAI or Airbnb, then great investment. Go do it. But... 25 million, say, and then it goes to a billion dollars. Let's just say that rather than 20. Let's be a little less ambitious than Mr. Altman was. That's a 40x return on your money. That's a good return. That's a great return.

Sadly, and we can get in the math here, it might not be good enough for an investor, like a fund investor. But the flip side of that is like a billion dollars is still a billion dollars. It's still kind of an unusual outcome. And I'm not saying like valuation here. I'm saying like actually cash, like IPO or selling or whatever, like not just make-believe valuations. actual money in the bank.

Sadly, and we can get in the math here, it might not be good enough for an investor, like a fund investor. But the flip side of that is like a billion dollars is still a billion dollars. It's still kind of an unusual outcome. And I'm not saying like valuation here. I'm saying like actually cash, like IPO or selling or whatever, like not just make-believe valuations. actual money in the bank.

And I think that's pretty rare, right? And the fact of the matter is, if you come in the kind of valuations that we do at, and it's capital efficient enough that these companies aren't raising money all the time. So say if we come in at a couple of million, 1.8, I think is our average, and then you 40X that, that's 72 million.

And I think that's pretty rare, right? And the fact of the matter is, if you come in the kind of valuations that we do at, and it's capital efficient enough that these companies aren't raising money all the time. So say if we come in at a couple of million, 1.8, I think is our average, and then you 40X that, that's 72 million.

72 million is still a lot of money, but it happens a lot more frequently than a billion dollars. Like we've done in discretion capital, we've done several deals this year that have been sort of in that range. And that's just us, you know, and like nobody ever reads about them.

72 million is still a lot of money, but it happens a lot more frequently than a billion dollars. Like we've done in discretion capital, we've done several deals this year that have been sort of in that range. And that's just us, you know, and like nobody ever reads about them.

Like we actually did, you know, like years ago now we did that iceberg, you know, the measuring the depth of the software iceberg title based on, you know, Patty Eleven's quote, an observation there around like most people don't know how much money exchanges hands about, you know, for these kinds of outcomes and how common the big ones are or the reasonably sized ones.

Like we actually did, you know, like years ago now we did that iceberg, you know, the measuring the depth of the software iceberg title based on, you know, Patty Eleven's quote, an observation there around like most people don't know how much money exchanges hands about, you know, for these kinds of outcomes and how common the big ones are or the reasonably sized ones.

So that's what it boils down to. Like basically what we're arguing is like, look, If you're going for that kind of enormous outcome, then yeah, it makes total sense. Raise it $25 million and capital will go for it. Like become OpenAI, become Airbnb.

So that's what it boils down to. Like basically what we're arguing is like, look, If you're going for that kind of enormous outcome, then yeah, it makes total sense. Raise it $25 million and capital will go for it. Like become OpenAI, become Airbnb.

But there's also this other class of startups where, you know, if you're B2B SaaS and as an investor, you can put money in that couple of million and then they sell for $50 to $100 million. That's as good. Like it doesn't matter to you. If you get 40x your money, what do you care? Whether 40x means $75 million as an exit or 40x means a billion dollars. It doesn't

But there's also this other class of startups where, you know, if you're B2B SaaS and as an investor, you can put money in that couple of million and then they sell for $50 to $100 million. That's as good. Like it doesn't matter to you. If you get 40x your money, what do you care? Whether 40x means $75 million as an exit or 40x means a billion dollars. It doesn't

I mean, other than bragging rights, it doesn't matter, right? It's just enterprise exit price.

I mean, other than bragging rights, it doesn't matter, right? It's just enterprise exit price.

Thanks for having me.

Thanks for having me.

And I think also like what some people, although I think awareness is raising a little bit, what some founders don't understand is like, look, there are trade-offs to this. Like, obviously, like if you can raise it a hundred million valuation, billion dollar valuation, there's really great things about that.

And I think also like what some people, although I think awareness is raising a little bit, what some founders don't understand is like, look, there are trade-offs to this. Like, obviously, like if you can raise it a hundred million valuation, billion dollar valuation, there's really great things about that.

But some of the bad things are there's a whole universe of outcomes that are not the doors closed for you. You know, like if you raise it $25 million, the chances that you're going to be able to or be allowed to sell for 50 is very low. In some cases, if you have extreme power and all this stuff and you didn't give away any rights, that's fine.

But some of the bad things are there's a whole universe of outcomes that are not the doors closed for you. You know, like if you raise it $25 million, the chances that you're going to be able to or be allowed to sell for 50 is very low. In some cases, if you have extreme power and all this stuff and you didn't give away any rights, that's fine.

But if you push valuations as high as possible, investors are going to put control provisions in there that sort of says, okay, look, the reason why we're giving you this high valuation is because you're saying you're gunning for this enormous outcome. So we're going to put some barriers in place that pushes you, that aligns everyone to that kind of outcome or nothing.

But if you push valuations as high as possible, investors are going to put control provisions in there that sort of says, okay, look, the reason why we're giving you this high valuation is because you're saying you're gunning for this enormous outcome. So we're going to put some barriers in place that pushes you, that aligns everyone to that kind of outcome or nothing.

Not get a high valuation and then sell for a reasonable amount. That door is very often closed.

Not get a high valuation and then sell for a reasonable amount. That door is very often closed.

A handful, but actually, just to change track a little bit, not as many as I thought. It's funny because we raised our second fund in 2021, and obviously 2021 was a good time in the markets. And at the time, I remember looking and I was like, oh, about 30% of the companies have raised money. And that's what I used to say, like about a third, about a third.

A handful, but actually, just to change track a little bit, not as many as I thought. It's funny because we raised our second fund in 2021, and obviously 2021 was a good time in the markets. And at the time, I remember looking and I was like, oh, about 30% of the companies have raised money. And that's what I used to say, like about a third, about a third.

There you go. It's nice to have you all to myself without Tracy interjecting with her blue sky nonsense.

There you go. It's nice to have you all to myself without Tracy interjecting with her blue sky nonsense.

And then I was coming around to fundraising again. I was like, okay, let's look at this. And actually, it's 8%.

And then I was coming around to fundraising again. I was like, okay, let's look at this. And actually, it's 8%.

Exactly. And so, so they just, they just, they just haven't done that. Like they just haven't raised, haven't raised any money. And actually that's sort of relates back to like how the tiny see different. And it's sort of like, well, I think people maybe don't understand. It's like how to venture measure performance on the way, because the issue with a venture fund is like, well, good and bad.

Exactly. And so, so they just, they just, they just haven't done that. Like they just haven't raised, haven't raised any money. And actually that's sort of relates back to like how the tiny see different. And it's sort of like, well, I think people maybe don't understand. It's like how to venture measure performance on the way, because the issue with a venture fund is like, well, good and bad.

You don't know if we're any good for at least 10 years. So if you're a charlatan, you can kind of keep going for 10 years and say, oh, I'll probably be right in a couple of years here. But like, I think it's understanding, like, how does most VCs, like, how does that make our life hard? Like, why is it a problem for a venture fund that only 8% of your companies have raised further funding?

You don't know if we're any good for at least 10 years. So if you're a charlatan, you can kind of keep going for 10 years and say, oh, I'll probably be right in a couple of years here. But like, I think it's understanding, like, how does most VCs, like, how does that make our life hard? Like, why is it a problem for a venture fund that only 8% of your companies have raised further funding?

And the answer is, as traditional venture fund, it'd be a failure if only 8% of your companies raised money.

And the answer is, as traditional venture fund, it'd be a failure if only 8% of your companies raised money.

And the reason for that is the way that venture investments work is that you as an investor, when you come along or GP, like a VC, basically, you come along and you're basically every quarter or so you send an update to your investors, your LPs, basically, that says this is what my portfolio is worth. And the way that you do that, obviously, they're not publicly traded.

And the reason for that is the way that venture investments work is that you as an investor, when you come along or GP, like a VC, basically, you come along and you're basically every quarter or so you send an update to your investors, your LPs, basically, that says this is what my portfolio is worth. And the way that you do that, obviously, they're not publicly traded.

And so what you're doing is you're basically saying doing two things. You either keep the market the same if they're just nothing material has changed, i.e. they haven't got out of business or they haven't raised money. Or if they raise money, then you market up to this new valuation.

And so what you're doing is you're basically saying doing two things. You either keep the market the same if they're just nothing material has changed, i.e. they haven't got out of business or they haven't raised money. Or if they raise money, then you market up to this new valuation.

And because of the length of these funds, most of the time, like a successful VC can raise several funds without returning any money at all. You know, it could just be like, hey, I'm raising fund number three and like look at my performance on my fund one and my fund two is up, you know, 3x or whatever, 2x, 5x. And it's all based on markups.

And because of the length of these funds, most of the time, like a successful VC can raise several funds without returning any money at all. You know, it could just be like, hey, I'm raising fund number three and like look at my performance on my fund one and my fund two is up, you know, 3x or whatever, 2x, 5x. And it's all based on markups.

It's all based on like how successful are you, are your portfolio and raising subsequent higher, you know, raise more money at higher valuations. That's to a large degree what success is like in VC. Like if you can have a fund that, you know, this is probably why YSE is such a great business. They, you know, they invest at one point, whatever they do.

It's all based on like how successful are you, are your portfolio and raising subsequent higher, you know, raise more money at higher valuations. That's to a large degree what success is like in VC. Like if you can have a fund that, you know, this is probably why YSE is such a great business. They, you know, they invest at one point, whatever they do.

And then, you know, it's like the standard valuation markup three months later, a demo day is like 25 million. Well, that's an enormous markup straight there. It blows everyone else out of the water. They capture a lot of that value to be perfectly honest. And so what do we do? Well, so we have to come up with something different, you know, which is always kind of challenging. And I think like,

And then, you know, it's like the standard valuation markup three months later, a demo day is like 25 million. Well, that's an enormous markup straight there. It blows everyone else out of the water. They capture a lot of that value to be perfectly honest. And so what do we do? Well, so we have to come up with something different, you know, which is always kind of challenging. And I think like,

The difference for us is like what we're trying to do is to say, look, these companies, the successful companies don't really need to raise any more money after this because they're so capital efficient. So how do we capture the fact that like the successful companies don't raise any more money? So there's no automatic markups.

The difference for us is like what we're trying to do is to say, look, these companies, the successful companies don't really need to raise any more money after this because they're so capital efficient. So how do we capture the fact that like the successful companies don't raise any more money? So there's no automatic markups.

And actually, like, it's funny, because in 21, when we had more markups and stuff, I remember doing it this way. And I was just like, okay, well, you know, we'll mark out why not, we're not going to handicap ourselves. People are asking, like, there's really not necessarily quite of a correlation between the success of the company and the valuation markup.

And actually, like, it's funny, because in 21, when we had more markups and stuff, I remember doing it this way. And I was just like, okay, well, you know, we'll mark out why not, we're not going to handicap ourselves. People are asking, like, there's really not necessarily quite of a correlation between the success of the company and the valuation markup.

Because in 21, in particular, and like, this is true in all bubbly things. you would have people who raised because they were doing really well, and then people who raised because they were doing really badly, and they were running out of money, and they were going to go under unless they raised money.

Because in 21, in particular, and like, this is true in all bubbly things. you would have people who raised because they were doing really well, and then people who raised because they were doing really badly, and they were running out of money, and they were going to go under unless they raised money.

And so they were able to do so, and then they got marked up above what even some of the best performing companies that we had. And so what we decided to do was basically say like, look, we're going to give you a market price.

And so they were able to do so, and then they got marked up above what even some of the best performing companies that we had. And so what we decided to do was basically say like, look, we're going to give you a market price.

And so we have a couple of different variants on this, but sort of our sort of base case valuation, which is most of the numbers we share out, it's basically some sort of a revenue multiple based on growth mostly. And it's somewhere between 2x and somewhere between 7x.

And so we have a couple of different variants on this, but sort of our sort of base case valuation, which is most of the numbers we share out, it's basically some sort of a revenue multiple based on growth mostly. And it's somewhere between 2x and somewhere between 7x.

And really what that valuation is, is different to even like a typical VC markup in the sense that, look, if you raise a Series A at a billion dollars, that does not mean you can sell your company for a billion dollars. That's just not happening. You know, obviously, you know, like if you raise it 200 times ARR, you're not selling it 200 times ARR. It's not possible.

And really what that valuation is, is different to even like a typical VC markup in the sense that, look, if you raise a Series A at a billion dollars, that does not mean you can sell your company for a billion dollars. That's just not happening. You know, obviously, you know, like if you raise it 200 times ARR, you're not selling it 200 times ARR. It's not possible.

Our base case valuation, though, is more like what is the market price currently? What is the clearing price? What is the liquidation price of the portfolio at the moment? And that's what we go to market with, which is... Kind of a handicap. I've got to be honest with you. Oh, big time. Much more conservative. Much more conservative.

Our base case valuation, though, is more like what is the market price currently? What is the clearing price? What is the liquidation price of the portfolio at the moment? And that's what we go to market with, which is... Kind of a handicap. I've got to be honest with you. Oh, big time. Much more conservative. Much more conservative.

And we provide like the optimistic case, which goes out, I think, to up to 11x. And we have one which includes the markups whenever they happen and a little bit more. But most of the time we're referring to the base case, so liquidation type valuation. And the reason for that is mostly that I want to be as conservative as possible.

And we provide like the optimistic case, which goes out, I think, to up to 11x. And we have one which includes the markups whenever they happen and a little bit more. But most of the time we're referring to the base case, so liquidation type valuation. And the reason for that is mostly that I want to be as conservative as possible.

You know, like I basically want to be able to argue because we're already doing something different. Like, you know, like we're not your typical what everyone else is expecting. And like, oh, yeah, this is how you get, you know, through an audit at Carta because the markups is from Andreessen and blah, blah, blah. So we had to be a little bit more conservative. It can be a challenge.

You know, like I basically want to be able to argue because we're already doing something different. Like, you know, like we're not your typical what everyone else is expecting. And like, oh, yeah, this is how you get, you know, through an audit at Carta because the markups is from Andreessen and blah, blah, blah. So we had to be a little bit more conservative. It can be a challenge.

Although I will say, and although it's not apples to apples, I was pretty stoked when Cardio, which is our fund management platform, they came out in the spring with like a performance metrics of 1800 funds, which actually includes us. And, you know, we were in the top five to six to 16% based on the venture metrics there. So even in our using our most conservative metric evaluation.

Although I will say, and although it's not apples to apples, I was pretty stoked when Cardio, which is our fund management platform, they came out in the spring with like a performance metrics of 1800 funds, which actually includes us. And, you know, we were in the top five to six to 16% based on the venture metrics there. So even in our using our most conservative metric evaluation.

So that felt good, but it's still a challenge, right? Because like it's new, right? People would rather have, in some cases, people are like, look, I believe that this company is worth a billion dollars because Andreessen says so, even though they're only doing 500,000 ARR, more than I believe that this company is worth 5x ARR.

So that felt good, but it's still a challenge, right? Because like it's new, right? People would rather have, in some cases, people are like, look, I believe that this company is worth a billion dollars because Andreessen says so, even though they're only doing 500,000 ARR, more than I believe that this company is worth 5x ARR.

Right. I mean, that's always the case. I mean, venture, I'm going to side rant here about venture and branding and stuff. But venture, I think a lot of the time, it's sort of a self-fulfilling prophecy. If you get lucky very early on in the early fund and you get the brand built, then you sort of like capital comes to you and, you know, deal flow comes to you.

Right. I mean, that's always the case. I mean, venture, I'm going to side rant here about venture and branding and stuff. But venture, I think a lot of the time, it's sort of a self-fulfilling prophecy. If you get lucky very early on in the early fund and you get the brand built, then you sort of like capital comes to you and, you know, deal flow comes to you.

And it's sort of a self-fulfilling prophecy that you do pretty well. So my one piece of advice, if you want to be a classic VC and you want to start a new venture fund, is to be extremely lucky with your investments in your first fund. That's the way to do it. That's all you got to do. Just be lucky. Just be lucky. That's good.

And it's sort of a self-fulfilling prophecy that you do pretty well. So my one piece of advice, if you want to be a classic VC and you want to start a new venture fund, is to be extremely lucky with your investments in your first fund. That's the way to do it. That's all you got to do. Just be lucky. Just be lucky. That's good.

No, no, no, no, no. I'm not listing hard luck or skill. I'm just saying, like, given a choice, you would rather be lucky. You'd rather be lucky, yeah.

No, no, no, no, no. I'm not listing hard luck or skill. I'm just saying, like, given a choice, you would rather be lucky. You'd rather be lucky, yeah.

No, I mean, I think that's it. I mean, like, it's a little unusual. Like, we're just sort of like, we're this is again, like we're saying, like, you know, it's every it takes 10 years to know if you're good in this game. And we're like, we're in year five.

No, I mean, I think that's it. I mean, like, it's a little unusual. Like, we're just sort of like, we're this is again, like we're saying, like, you know, it's every it takes 10 years to know if you're good in this game. And we're like, we're in year five.

Things are good. Like we're not a little bit unusual to like, we're not vastly increasing the size of our fund, which is, you know, quite common, like in the VC world, it's very often like, You start with a small fund and you quadruple it and then that works out and you quadruple it again. And like, we're not doing that. We're just sort of like, look, this is what we feel good about.

Things are good. Like we're not a little bit unusual to like, we're not vastly increasing the size of our fund, which is, you know, quite common, like in the VC world, it's very often like, You start with a small fund and you quadruple it and then that works out and you quadruple it again. And like, we're not doing that. We're just sort of like, look, this is what we feel good about.

This is the size of this opportunity. And like, we're keeping the funds sort of the same and just keep executing the way it has been because it seems to be working. We think it will be continued to do.

This is the size of this opportunity. And like, we're keeping the funds sort of the same and just keep executing the way it has been because it seems to be working. We think it will be continued to do.

Like, we could put more money into individual companies. Like, do we do all this stuff? But fundamentally, the core strategy of TinySeat sort of remains the same. Like, this is the size of the opportunity. This is what we think believes. And there are numerous venture funds that have done well at, say, being a $25 million fund.

Like, we could put more money into individual companies. Like, do we do all this stuff? But fundamentally, the core strategy of TinySeat sort of remains the same. Like, this is the size of the opportunity. This is what we think believes. And there are numerous venture funds that have done well at, say, being a $25 million fund.

And because they've done so well, like lots of people are interested and then they decide, let's raise $250 million. But if you're $250 million, all of a sudden you're doing different kinds of investments, maybe even in different kinds of companies, different stages. Who says you're good at that?

And because they've done so well, like lots of people are interested and then they decide, let's raise $250 million. But if you're $250 million, all of a sudden you're doing different kinds of investments, maybe even in different kinds of companies, different stages. Who says you're good at that?

Like, you know, just because you're good at writing $250,000 checks does not mean you're good at writing $5 million checks into later stage companies. And your competition might be different and your deal flow might be different and your pricing power might not be there at that stage and all this stuff. Yeah.

Like, you know, just because you're good at writing $250,000 checks does not mean you're good at writing $5 million checks into later stage companies. And your competition might be different and your deal flow might be different and your pricing power might not be there at that stage and all this stuff. Yeah.

It allows us to keep the sort of batches small, right? It's nice to have some of that intimacy. Like we're not 150, 200 people in batches. Like we're talking 20 people, 25 people, which is nice.

It allows us to keep the sort of batches small, right? It's nice to have some of that intimacy. Like we're not 150, 200 people in batches. Like we're talking 20 people, 25 people, which is nice.

Or anarvolset.com on Blue Sky.

Or anarvolset.com on Blue Sky.

Thanks for having me.

Thanks for having me.

Yeah, that sounds good. And also, I think it's just even if you're, you know, even if you're not going to go for tiny seeds, you're not investing in VC funds. I think it's helpful to understand, like, if you're thinking about funding, whether from tiny seeds or other people, I think it's worth understanding, like, what are the incentives?

Yeah, that sounds good. And also, I think it's just even if you're, you know, even if you're not going to go for tiny seeds, you're not investing in VC funds. I think it's helpful to understand, like, if you're thinking about funding, whether from tiny seeds or other people, I think it's worth understanding, like, what are the incentives?

How does this work on that end so that you understand what you're signing up for?

How does this work on that end so that you understand what you're signing up for?

Well, I think it makes sense. And also, this has always been my thing, a little bit of a sort of pet peeve thing is like, look, like some of the some of these purists on the sort of never raise any funding part is like they're never raising any funding.

Well, I think it makes sense. And also, this has always been my thing, a little bit of a sort of pet peeve thing is like, look, like some of the some of these purists on the sort of never raise any funding part is like they're never raising any funding.

Oh, is that because, you know, your wife works full time at Morgan Stanley and so basically can support you or you have rich parents or like, you know, you're basically wealthy. So, yeah, it actually sort of democratizes starting your own SaaS business a fair bit for those that don't necessarily sit on a bunch of cash.

Oh, is that because, you know, your wife works full time at Morgan Stanley and so basically can support you or you have rich parents or like, you know, you're basically wealthy. So, yeah, it actually sort of democratizes starting your own SaaS business a fair bit for those that don't necessarily sit on a bunch of cash.

Oh, yeah, for sure. I mean, yeah, I think it's just worth for people to think about. Like, I think sometimes people think, oh, investing in VC funds, you know, think Sequoia, Andreessen, whatever. And it's just like, oh, it's how you get 100x. You know, like you read about these outcomes and you think, you know, what is, you know, they're going to 100x.

Oh, yeah, for sure. I mean, yeah, I think it's just worth for people to think about. Like, I think sometimes people think, oh, investing in VC funds, you know, think Sequoia, Andreessen, whatever. And it's just like, oh, it's how you get 100x. You know, like you read about these outcomes and you think, you know, what is, you know, they're going to 100x.

The fact of the matter is, like, if you look at the sort of one of the golden sort of decades for venture investing in the US was the sort of decade between 2004 and 2014. It includes, you know, a bunch of like, you know, now well-known names came through that decade.

The fact of the matter is, like, if you look at the sort of one of the golden sort of decades for venture investing in the US was the sort of decade between 2004 and 2014. It includes, you know, a bunch of like, you know, now well-known names came through that decade.

And so you might think to yourself, like, well, you know, to be in the top quarter of performance of venture funds in terms of return capital in that quartile, you probably returned what? What do you think? Like 5x, 6x, some of that. In fact, the actual math is more like 2x. I think it's 2.16 or something.

And so you might think to yourself, like, well, you know, to be in the top quarter of performance of venture funds in terms of return capital in that quartile, you probably returned what? What do you think? Like 5x, 6x, some of that. In fact, the actual math is more like 2x. I think it's 2.16 or something.

So, you know, it was a 2.1x. And over the course of what, 7 to 10 years? Up to 10 years. Unreal. Yeah. Yeah, that's a top quartile fund.

So, you know, it was a 2.1x. And over the course of what, 7 to 10 years? Up to 10 years. Unreal. Yeah. Yeah, that's a top quartile fund.

And like, really, the reason is because a lot of funds like and also like, look, I think the median fund still returns like at least one X, but it's there is a good number that that returned less than one X is probably 40% of funds, you don't even get your money back. That's pretty common. And so then you look further as like, okay, well, what's great performance in venture?

And like, really, the reason is because a lot of funds like and also like, look, I think the median fund still returns like at least one X, but it's there is a good number that that returned less than one X is probably 40% of funds, you don't even get your money back. That's pretty common. And so then you look further as like, okay, well, what's great performance in venture?

Like top clearly like 2X over, in that same timeframe, the S&P 500 probably went way up. I mean, it had the housing crash in 2008, but nonetheless, like what is amazing performance, like world-class look like? And that's actually in that quartile, it was just over 5X. So if you 5X, if you're a venture fund that 5X, then you were in the top 5% of funds in that timeframe.

Like top clearly like 2X over, in that same timeframe, the S&P 500 probably went way up. I mean, it had the housing crash in 2008, but nonetheless, like what is amazing performance, like world-class look like? And that's actually in that quartile, it was just over 5X. So if you 5X, if you're a venture fund that 5X, then you were in the top 5% of funds in that timeframe.

And I think the reason why people sort of like misunderstand this, they think venture, and then they think like, oh, you know, what do I know, think about when I think about venture? Well, it's like, it's like Airbnb type returns. You know, you hear about like YC, they invested at whatever, probably put same, I was in the same batch. So I know what they put in, probably $40,000, $20,000.

And I think the reason why people sort of like misunderstand this, they think venture, and then they think like, oh, you know, what do I know, think about when I think about venture? Well, it's like, it's like Airbnb type returns. You know, you hear about like YC, they invested at whatever, probably put same, I was in the same batch. So I know what they put in, probably $40,000, $20,000.

And you know, they, a thousand X or something like that. And so I think that sometimes translates into like, oh, at the fund level, That's the kind of return. So maybe not a thousand, but you're getting a hundred times your money. But that's an extreme outlier for venture funds. And really, if you're looking for a thousand X, you shouldn't be in venture. You shouldn't be in venture funds.

And you know, they, a thousand X or something like that. And so I think that sometimes translates into like, oh, at the fund level, That's the kind of return. So maybe not a thousand, but you're getting a hundred times your money. But that's an extreme outlier for venture funds. And really, if you're looking for a thousand X, you shouldn't be in venture. You shouldn't be in venture funds.

That doesn't make any sense. It's almost impossible to get a thousand. It is impossible to get a thousand X in a venture fund or even a hundred X. If you're wanting to do that, then you should put all your money into single bets. Like you should be investing in individual companies and like concentrate your position as much as you can into your extreme high conviction bets and just go for that.

That doesn't make any sense. It's almost impossible to get a thousand. It is impossible to get a thousand X in a venture fund or even a hundred X. If you're wanting to do that, then you should put all your money into single bets. Like you should be investing in individual companies and like concentrate your position as much as you can into your extreme high conviction bets and just go for that.

And that's the way to do that. But a lot of investors, they don't want to do that. And so the question then is like, why would you invest in a venture fund instead of doing that? The reason is you're reducing risk. That's what you care about. Like you're basically trading off. You're saying like, look, OK, I'm willing to forego this notion that I'm going to, you know, 100x my money.

And that's the way to do that. But a lot of investors, they don't want to do that. And so the question then is like, why would you invest in a venture fund instead of doing that? The reason is you're reducing risk. That's what you care about. Like you're basically trading off. You're saying like, look, OK, I'm willing to forego this notion that I'm going to, you know, 100x my money.

But the flip side is I'm less likely to lose it all. The standard outcome, if you invest all your money into a single company, is you're going to lose it. Like at least an early stage company, you're going to lose all the money. And if that's not something that you want to do, that's not part of your investment strategy, then investing in a fund makes sense. And you're making that trade off then.

But the flip side is I'm less likely to lose it all. The standard outcome, if you invest all your money into a single company, is you're going to lose it. Like at least an early stage company, you're going to lose all the money. And if that's not something that you want to do, that's not part of your investment strategy, then investing in a fund makes sense. And you're making that trade off then.

I mean, it's probably above way above average return. So good job.

I mean, it's probably above way above average return. So good job.

Well, I think I think that's the key thing. Like I tell people this, and I'm not just I'm not being, you know, unusually humble about this. And the fact is, like, TinySeed wouldn't work if you weren't there. Yeah. At least the early days. I don't have the deal flow. I just don't.

Well, I think I think that's the key thing. Like I tell people this, and I'm not just I'm not being, you know, unusually humble about this. And the fact is, like, TinySeed wouldn't work if you weren't there. Yeah. At least the early days. I don't have the deal flow. I just don't.

And I think because of your background with MicroConf and Startups for the Rest of Us and all the stuff that people know about you, and there's probably you, and I've been saying there's less than half a dozen people worldwide that naturally has that kind of deal flow, quality deal flow, pricing power that's coming your way.

And I think because of your background with MicroConf and Startups for the Rest of Us and all the stuff that people know about you, and there's probably you, and I've been saying there's less than half a dozen people worldwide that naturally has that kind of deal flow, quality deal flow, pricing power that's coming your way.

And I think really that's part of the reason why you would invest in a fund. Because if you look at it, say you have an amount to invest in, whatever that is, 100,000, 250,000, 500,000, whatever it is. Okay, well, if you do your research and look, you realize you probably shouldn't just pile into just, you know, a single bet, like put it all on black as it were.

And I think really that's part of the reason why you would invest in a fund. Because if you look at it, say you have an amount to invest in, whatever that is, 100,000, 250,000, 500,000, whatever it is. Okay, well, if you do your research and look, you realize you probably shouldn't just pile into just, you know, a single bet, like put it all on black as it were.

So instead, what you want to do is you want to go out and you want to make a lot of bets, ideally. Like you probably, I think like the math pretty much says, like, you know, if you're going to have a better than 50% chance of at least breaking even, you should be making at least, I think it's somewhere like 15 and 20 bets, like investments rather than bets. I shouldn't call it bets. Yeah.

So instead, what you want to do is you want to go out and you want to make a lot of bets, ideally. Like you probably, I think like the math pretty much says, like, you know, if you're going to have a better than 50% chance of at least breaking even, you should be making at least, I think it's somewhere like 15 and 20 bets, like investments rather than bets. I shouldn't call it bets. Yeah.

20 investments. But if you think about, okay, how do you do that? If you have $100,000, you say, okay, I believe the math. I want to put $100,000 in. Now you have to write 20 checks of $5,000 each. Now you have more problems than when you started because do you have the deal flow to find 20 quality investments?

20 investments. But if you think about, okay, how do you do that? If you have $100,000, you say, okay, I believe the math. I want to put $100,000 in. Now you have to write 20 checks of $5,000 each. Now you have more problems than when you started because do you have the deal flow to find 20 quality investments?

Are you going to see enough good deals just from your networks and friends and connections and whatever, an angel list or whatever, in order to make that, those investments? And I would argue that most of the time you don't. Like you don't see the, you don't get to access the deal flow. You don't have it. But even if you did, so say you were uniquely well-connected, now it's like, okay,

Are you going to see enough good deals just from your networks and friends and connections and whatever, an angel list or whatever, in order to make that, those investments? And I would argue that most of the time you don't. Like you don't see the, you don't get to access the deal flow. You don't have it. But even if you did, so say you were uniquely well-connected, now it's like, okay,

Now you need to convince people to take a small check from you individually. Like so now like most people aren't going to take like most people who invest like an individual investor that goes along and says, all right, well, you know, I want to put $5,000 in.

Now you need to convince people to take a small check from you individually. Like so now like most people aren't going to take like most people who invest like an individual investor that goes along and says, all right, well, you know, I want to put $5,000 in.

It actually can be quite hard to even if people are raising money, it can be quite hard to get people to accept $5,000 because it's such a small check. So there's usually like a minimum before you have to get in.

It actually can be quite hard to even if people are raising money, it can be quite hard to get people to accept $5,000 because it's such a small check. So there's usually like a minimum before you have to get in.

And quality investments, like, you know, like a friend will do it. That's great. But like, how many friends do you have? Do you have 20 friends that are really, truly, rigorously, like is high quality and that you can put $5,000 in? Yeah. starts to get difficult. And then, you know, on top of that, like once, even if you get passed, like, can I even get my checking? Can I get the deal flow?

And quality investments, like, you know, like a friend will do it. That's great. But like, how many friends do you have? Do you have 20 friends that are really, truly, rigorously, like is high quality and that you can put $5,000 in? Yeah. starts to get difficult. And then, you know, on top of that, like once, even if you get passed, like, can I even get my checking? Can I get the deal flow?

Then it's like, okay, well, who's setting the price here? Are you going to be able to get it? Because whatever VCs tell you, like the name of the game in VC is entry price, exit price. If you overpay for your investments, then you're not going to make any money. You know, if you invest at $50 million pre for a pre-product or

Then it's like, okay, well, who's setting the price here? Are you going to be able to get it? Because whatever VCs tell you, like the name of the game in VC is entry price, exit price. If you overpay for your investments, then you're not going to make any money. You know, if you invest at $50 million pre for a pre-product or

you know, pre-revenue business, it's a really big hurdle for you to make a reasonable return, obviously, because you overpaid for it. And so that's sort of the third thing that comes into it. It's like, do you have the pricing power? So can you get the deal flow? Do you have the pricing power to get a reasonable valuation? And can you even put your money in?

you know, pre-revenue business, it's a really big hurdle for you to make a reasonable return, obviously, because you overpaid for it. And so that's sort of the third thing that comes into it. It's like, do you have the pricing power? So can you get the deal flow? Do you have the pricing power to get a reasonable valuation? And can you even put your money in?

And that's alongside like, okay, well, you probably have a full-time job. How often are you doing these investments? Are you learning fast enough to stop doing stupid shit and start doing good investments? And that's really the reason why, along with this spreading of risk, why people invest in venture funds as opposed to just being individual angel investors.

And that's alongside like, okay, well, you probably have a full-time job. How often are you doing these investments? Are you learning fast enough to stop doing stupid shit and start doing good investments? And that's really the reason why, along with this spreading of risk, why people invest in venture funds as opposed to just being individual angel investors.

He was one of the main ones there in his day.

He was one of the main ones there in his day.