The Twenty Minute VCAdam Besnivick: How to Invest in Pre-Seed & Seed Stage Companies; Looking Glass Capital | E1020
CHAPTERS
- 0:00 – 1:13
Breaking into venture: Twitter networking, cold emails, and landing Lowercase Capital
Adam recounts how joining Twitter in 2009 became his gateway into venture, enabling him to learn publicly and build relationships early. He shares how persistent cold outreach led to working with Chris Sacca at Lowercase Capital while in business school.
- •Used Twitter to follow and engage VCs long before having a large network
- •Cold emailed hundreds of investors to transition from traditional finance to VC
- •Persistence and follow-up turned a cold email into work with Chris Sacca
- •Early career shaped by hands-on exposure to venture decision-making
- 1:13 – 3:27
Reputation as the compounding currency with founders (and investors)
Adam explains that reputation—especially with founders—is the most controllable and durable asset a VC has. He distinguishes reputation with founders from reputation with other investors, and argues founder trust must never be compromised.
- •Track record is partially outside an investor’s control; reputation is not
- •Founder-first respect compounds into better deal flow and references
- •Different dynamics: reputation with founders vs. other investors
- •Transactional deal behavior can damage long-term compounding
- 3:27 – 5:39
The mindset shift: why seeing (and passing on) great deals still matters
They discuss the psychological transition from fearing regret to valuing being “in the flow” of top opportunities. Adam argues that over time, investors prefer having seen iconic outcomes—even if they passed—rather than never having access at all.
- •Early disbelief that investors prefer seeing great deals and passing vs never seeing them
- •Over time, perspective changes as you understand portfolio math and access
- •Harry challenges the ‘see everything’ mentality; focus and targeting matter
- •Foreshadows Adam’s case for thematic focus
- 5:39 – 6:26
Why 'Looking Glass': investing requires suspension of disbelief at pre-seed
Adam explains the fund’s name as an allusion to 'Through the Looking-Glass' and the fantastical nature of underwriting companies that are pre-product and pre-revenue. He highlights that early-stage decisions often look irrational on a pros/cons list.
- •Pre-seed investing involves betting before evidence exists
- •Most deals have more “cons” than “pros” on paper at the moment of investment
- •The name reflects the imaginative leap required to say yes repeatedly
- •Sets tone for early-stage risk acceptance
- 6:26 – 9:07
Fund construction: $8.5M Fund I to $20M Fund II, ownership targets, and pricing discipline
Adam details the step-up from Fund I to Fund II and why $20M was an iterative, underwritable increase. He breaks down his portfolio construction logic: check sizes, number of companies, ownership goals, and why a $1B outcome should return smaller funds.
- •Fund II targets $20M; Fund I was ~$8.5M
- •Typical checks: moving from ~$300–400K to ~$400–500K; portfolio ~24 to ~30 companies
- •For sub-$50M funds, a $1B outcome should return the fund; ownership math drives strategy
- •Average Fund I ownership ~4% at entry; expects 60–65% dilution over time
- •Average entry pricing mentioned ~9.1 post; aims to avoid inflated ‘multi-stage seed’ pricing
- 9:07 – 13:11
‘First money in’ strategy: first yes, leading without being the biggest check, and non-coastal valuations
Adam describes how he consistently gets lower caps by being early—often the first institutional yes—and by sourcing outside the most competitive hubs. He explains how he “leads” through setting terms, responsiveness, and syndicate building, even when not writing the largest check.
- •Targets being first money in / “first yes” (firstyes.vc) to shape rounds early
- •Fund I: first fund yes/lead/co-lead in 14 of 24; largest investor in only 1 of those
- •Geography matters: many deals in secondary/tertiary hubs helps keep valuations down
- •Typical structure: $1.5–2M rounds at $6–10M post as ‘middle of the fairway’
- •Big multi-stage funds sometimes join later without repricing the round
- 13:11 – 20:42
Fundraising materials: data rooms, memos, LP updates—and avoiding overload
Adam shares lessons from Fund I fundraising, especially being caught without subscription docs. He outlines his “institutional” approach to preparation: comprehensive data rooms, investment memos for every deal, and highly transparent LP communications—while acknowledging the risk of overwhelming allocators.
- •Lesson learned: have legal/subscription docs ready earlier than you think
- •Maintains a formal data room with all investment memos and historical LP updates
- •Writes detailed LP letters every ~8 weeks with company-by-company transparency
- •Prefers providing more information and letting LPs choose depth
- •Advice for first-time managers: deck, track record basics, and references can be enough
- 20:42 – 27:14
LP sourcing and conversion: warm networks, check minimums, and creating momentum (not fake deadlines)
Adam explains that first-fund LPs mostly come from people who already know you or from introductions by existing yeses. He discusses LP composition shifts from Fund I to Fund II, minimum check policies (and exceptions), and why momentum beats deadline bluffing when LPs are slow.
- •Fund I LPs were almost entirely personal relationships or second-degree intros
- •Fund I had 80+ LPs; Fund II shifts toward higher-net-worth individuals and family offices
- •Minimum checks: $100K (Fund I) and $250K (Fund II), with strategic exceptions
- •Creating urgency is hard without an anchor; bluff deadlines don’t work
- •Best tactic: frequent progress updates, new investments, markups, and co-investor validation
- 27:14 – 30:34
First close vs final close: minimum viable fund size and pacing portfolio construction
Adam shares how COVID disrupted Fund I fundraising and why experienced GPs urged him to close earlier. He offers a rule of thumb: first close at ~50% of your minimum viable fund, and invest as if you’ll only reach the minimum to avoid ending with an undersized portfolio.
- •COVID fundraising whiplash: paused in March 2020, restarted when markets reopened
- •In Fund I, he waited too long aiming for ~50–60% of target before first close
- •Updated guidance: first close at ~50% of minimum viable fund (not target)
- •Invest conservatively early to avoid too few companies if fundraising stalls
- •Treat early fund operations like a startup: get into market and start executing
- 30:34 – 40:23
The ‘inside baseball’ pre-seed approach: strict rules, when to make exceptions, and syndicate building
Adam argues his approach is unusual for sub-$25–40M funds: fewer companies, larger checks, target ownership, and minimal deviation from constraints. They debate whether rigid rules cause missed alpha, and Adam frames constraints as clarifying when an exception is truly warranted.
- •Many small funds run scattershot portfolios; he prioritizes ownership and discipline
- •Rules: target check size and ownership ranges; avoids small, token allocations
- •Constraints make exceptions more intentional and explainable
- •Rejects ‘adverse selection’ framing; believes allocations reflect founder fit
- •Post-commitment, he helps fill rounds by curating investor lists and making intros
- 40:23 – 42:38
Loss ratio at pre-seed: underwriting zeros, portfolio power laws, and learning from ‘risks & mitigants’
Adam discusses expectations for failures and explains that venture returns are driven by a minority of outcomes. He describes his process of documenting risks at investment time and using those notes to evaluate whether later problems were foreseeable or simply unmitigated.
- •Pre-seed is a ‘grand slam’ game; many outcomes will be zero or <1x
- •Expects 20–30% of portfolio to drive most returns; 40–50% may be zeros/<1x
- •A few companies currently create concern, but risks were known at entry
- •Every memo ends with ‘risks and mitigants’ to revisit later
- •Post-mortems focus on whether a known risk failed to improve as expected
- 42:38 – 45:41
Why thematic investing works (for a solo GP): sourcing, credibility, and faster syndication
Harry questions theme investing given early pivots, but Adam argues themes are essential due to bandwidth constraints and reputational positioning. He explains how themes improve inbound, referrals, founder trust, and the ability to quickly assemble the right co-investors.
- •As a solo GP, he can’t be a generalist or chase every hot deal
- •Themes make him top-of-mind for investor referrals and founder inbound
- •Responds to all inbound to protect reputation and stay founder-friendly
- •Theme credibility helps in cold outbound by pointing to relevant portfolio companies
- •Uses a tagged database of investors by stage/category/check size to build syndicates fast
- 45:41 – 47:32
Founder mistakes in round composition: narrow funnels and ignoring ‘partner fit’ at funds
Adam outlines common fundraising errors founders make when building a round and cap table. He emphasizes broadening the investor funnel beyond household names and recognizing that the individual partner—and internal fund dynamics—matter as much as the firm brand.
- •Founders often target too narrow a list (e.g., only famous funds)
- •Great investors can be niche, geographically off-market, and highly value-add
- •Strategic value should matter alongside dollars
- •Partner selection is critical; funds aren’t monoliths
- •Investors can help route founders to the right partner based on personality and incentives
- 47:32 – 1:07:29
What changed in VC: seed definition drift, disciplined early rounds, signaling views, and the 2021→2023 whiplash
They discuss how multi-stage funds reshaped “seed,” how pre-seed can disappear for elite pedigrees, and why Adam prefers smaller, disciplined early raises with ~24 months of runway. In quick-fire, Adam predicts a bifurcation toward specialized smaller funds and mega-firms, shares his updated view on signaling, and explains how capital pullback impacts founders.
- •‘Seed’ labels are misleading; $7M+ ‘seed’ rounds often bundle multiple stages
- •Looking Glass targets founders who choose disciplined raises vs defaulting to huge early rounds
- •Rule of thumb: raise for ~24 months gross burn; discipline beats oversized runway
- •Changed mind on signaling: raise from reputable, aligned, clean-term capital; optics matter less in tough markets
- •VC whiplash: 2021 deployment → 2023 slowdown, more diligence, more reserves, fewer new deals
- •Future of VC: specialization + behemoths; winners adapt and offer distinct value
