E291: Incentives, Not Intuition: How VC Really Works
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What lessons have been learned from two decades of consumer tech investing?
So you spent a decade at Battery where you're a general partner, then you spent five years at Accel as a partner, and then seven years at Forerunner.
So you've been really investing in and around consumer for two decades. What lessons have you learned about consumer tech and how to invest in space? These markets are just so much bigger than they are in other categories. So the biggest thing is that the startups that we're investing in are ultimately solving everyday needs for millions of Americans. And so there's usually some catalyst that creates this opportunity. It might be some underlying foundational new technology. It might be some change in the business model. Sometimes it's even cultural or regulatory that opens up the opportunities. But I think people have misnomers about these businesses. There's a general assumption that to play in a consumer space, these businesses are fads or that they're capital intensive.
I mean, you're solving people's everyday needs to ultimately create a recurring use case that drives real long term value. And if you look back to a company like Google, as an early example, they raised their series A of $25 million. So it's a very large A for the time, but they never really raised another round after that until they were already profitable. If you look at a company in my portfolio named Fora, which is one of the first AI-powered services companies to reach a billion dollars in transactional volume, they recently raised a Series C from Thrive, but they hadn't even touched the Series B dollars yet.
Why are consumer startups viewed as misunderstood in the investment landscape?
So I think there's this general understanding from the whole Zerp era that these companies are capital intensive and that they're ultimately more product-driven versus technology-driven. Mike Moritz famously coined this term specifically for his consumer, the seven deadly sins. So you have like Uber Eats and DoorDash for gluttony. You have Instagram for vanity. To what extent do you feel that that's true today, 2025? There's definitely lower hanging fruit when you're when you're solving for the seven deadly sins. But I would say in some ways the lines are blurring. So if you take a really key trend right now, which is around longevity or people spending their own dollars to drive their own health, you could argue that's a much more core need and something that doesn't play off of the seven deadly sins.
But also health is the new wealth. And so in some ways there's a vanity metric to be doing some of these things. Yeah, absolutely. It's always important when we look at these companies, take the education category, for example. It's hard work getting a degree, teaching yourself a language. And so we are ultimately playing against the seven deadly sins. The companies need to be that much more effective with how they drive the product mechanics, with how they build a community together, because in those cases, you're you're running uphill.
How is AI reshaping consumer products and services?
But the most successful businesses, something like a Duolingo, they're able to accomplish that. They're almost able to take this long-term feedback cycle and turn it into kind of short-term rewards, which is the gamification of these kind of more worthwhile pursuits than the seven deadly sins. 100%. There's a view that Instagram, Facebook, all these companies were kind of part of this deterministic wave of, you know, somebody was going to create a photo sharing app. Somebody was going to create a social network. To what degree do you believe that's true? I definitely believe that's true. A lot of these companies started with some intrinsic need. They were usually not the first ones to solve, but ultimately came up with the right solution at the right time.
And so if you think about Facebook, they were solving this natural human desire to connect. And they were able to do so in a way that once you had cloud servers and once you had more internet connectivity was just possible online. You know, better than if you had to pick up the phone and call someone long distance before. If they hadn't done it, I believe someone else would have come along and solve the problem with the scale that they did.
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Chapters
8 chapters
1
What lessons have been learned from two decades of consumer tech investing?
0:00–1:29
2
Why are consumer startups viewed as misunderstood in the investment landscape?
1:29–3:02
3
How is AI reshaping consumer products and services?
3:02–4:15
4
What are the misconceptions about capital intensity in consumer businesses?
4:15–5:25
5
How do incentives drive venture outcomes rather than talent?
5:25–6:56
6
What challenges do early-stage investors face in the current market?
6:56–8:27
7
How can AI agents enhance consumer experiences today?
8:27–9:51
8
What is Tactile Ventures' vision for the future of consumer investing?
9:51–53:21
Speakers
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