The Twenty Minute VCMark Goldberg: Why Politics is Rife & Decision-Making is Broken in Large VCs | E1219
EVERY SPOKEN WORD
125 min read · 25,103 words- 0:00 – 1:14
Intro
- MGMark Goldberg
I think one of the dirty secrets of multi-stage investing is that portfolio services teams are not for founders, they're for the VCs. They are a way to make something unscalable, scale. So we have a very light reserve model. Peanut buttering all of your reserves in every pro rata round that gets done is not a good thing for a founder. The biggest mistake is when you try to make consensus decisions at the early stage, I think you end up with consensus funds.
- HSHarry Stebbings
Ready to go? Mark, dude, I am so excited for this. When we last did one, I was actually young, so this is a joy and, uh, I really appreciate our friendship. So thank you for joining me.
- MGMark Goldberg
Harry, it's a total pleasure. And, you know, it has been so fun to watch you launch your new fund. Uh, I think I read online that it was a 10-year overnight success, and I think that's what most resonated with me. You've been, you know, just doing such a good job crushing it, and I'm- I'm thrilled for you. So it's fun to be doing- doing new funds at the same time.
- HSHarry Stebbings
Dude, it is great fun. And there's nothing like having your own shop. I always say this to people, like having your name above the door is the most special thing, and building your own is- is just so
- 1:14 – 2:21
Why Did Mark Start Chemistry in a Crowded VC Market?
- HSHarry Stebbings
special. So I- I do just want to start with that, which is like, there are so many venture firms, respectfully. Why did you feel like the world needed another one? And- and what was that kind of realization with the founding of Chemistry?
- MGMark Goldberg
The world doesn't need another venture fund. It needs a new venture fund. Um, there are too many VCs right now. Um, but we wanted to do something different. And what Christina, Ethan, and I started talking about was, and we've been talking about this for a long time, is if you were going to design a fund where you fully aligned the values of the investors with the founders, what would it look like? That was kind of the question that was the jumping point to getting started here. And what we thought about is, first off, it would be smaller, it would be focused, it would be a combination of experienced investors from some of the biggest multi-stage platforms coming tog- together, Avenger style, and seeing if you could do something different. And you just talked about, you know, what it feels like to be an owner. I wanted that, Christina and Ethan wanted that. And we felt like the combination of experience and hustle was something that would kind of be the blueprint for a new fund. Um, so that was kind of the- the origin of how we started talking about this. And- and it's been a huge amount
- 2:21 – 3:03
Fund Size & Its Impact on Founder Alignment
- MGMark Goldberg
of fun so far.
- HSHarry Stebbings
Okay. Why does fund size correlate to alignment to founders?
- MGMark Goldberg
I don't necessarily think the fund size does. I think it's the purview of the responsibilities of the fund. Um, so for us, having a stage focus I think is very important. I've seen, and I think, you know, all three of us had seen what the growth of different products and the size of a portfolio does to the focus of an investor. And I think there's a paradox at a lot of the- the larger legacy institutions where the most experienced VCs have the least amount of time to spend on new deals. And I think that's a problem for founders. Um, and that was something that we thought a lot about as we were debating whether or not we were going to jump into this, and one of the things we thought we could help solve with- with-
- 3:03 – 10:37
Multi-Stage Firms
- MGMark Goldberg
with Chemistry.
- HSHarry Stebbings
Is that not just nature of a maturing portfolio, though? Even if you are a series A only investor at a multi-stage firm, if you're 10 years in, two a year over a five-year period, fuck, you've got 10 board seats there.
- MGMark Goldberg
The- y- so absolutely. The- the longer you're in market, you know, it's- it's the portfolio's like an iceberg. It just grows. And especially in an- in an environment like today where liquidity is- is not as readily available. That said, I think taking an ax to all the bureaucracy of a large institution gives you superpowers in terms of what you're able to do with your time.
- HSHarry Stebbings
What is the bureaucracy of a large institution?
- MGMark Goldberg
When you're running-
- HSHarry Stebbings
I've never been-
- MGMark Goldberg
I think- I think when you're running an organization that is- that is hundreds of people, that is multinational, like many of the large funds are today, um, I think there's a lot of time spent on people management, on administrative work, and that- that has a- that has a tax on the organization. When I think the most important thing is spending time with founders and spending time with founders at the early stage.
- HSHarry Stebbings
They would say that they have incredible teams and they have IR and they have legal and accounting and portfolio services, which mean they are able to just be finding the next Dylan Field. What do you say back to that?
- MGMark Goldberg
I would challenge the notion that when you talk about, for example, some of the portfolio services teams, I think one of the dirty secrets of multi-stage investing is that portfolio services teams are not for founders, they're for the VCs. They are a way to make something unscalable, scale. And I think right now, we're starting to see the cracks of an industry that has relied on kind of subdivisions of the job, whether it's, you know, a talent team or a- a team that's going out and finding customers. But I think what founders really want is not to be disintermediated between the relationship between an investor and the founder. That- that's really the premise of our fund, and one of the things that I think that some of the industry has gotten wrong. Now, I would also clarify, I don't think it started that way. I think the intention, and if you go back to the innovation from 10, 15 years ago when Andreessen Horowitz started, it was a great idea. It was this sense of, you know, excitement and innovation for venture. But I think where we are now is it's become more of a crutch to these organizations to try to get leverage in an area that's very difficult to do.
- HSHarry Stebbings
I think it's also used as a justification for the increase in fund size, 'cause now you can show to LPs, "Well, we've got 10 people in talent, 10 in BD, we even do sales for our companies, in which case we need the new huge fund, because this is how we've structured our team."
- MGMark Goldberg
I would agree. And I think, again, it's- it's not that there aren't great people in these functions, is that the... You know, I think what founders really want is a direct relationship with- with an experienced investor.
- HSHarry Stebbings
You said it kind of like, what would it be if it was like true alignment between GP and founder? Sounded so nice.
- MGMark Goldberg
(laughs)
- HSHarry Stebbings
Um, so do you guys...Do you guys only take common shares then? 'Cause I'm being serious.
- MGMark Goldberg
(laughs)
- HSHarry Stebbings
But I'm- I'm- I can be deliberately spicy with you, you and my friends.
- MGMark Goldberg
You can abs- absolutely be spicy. You know, uh, it's- it's- I- I think when we think about alignment, it's more about putting the incentives in- in terms of where you're spending time. And I think being able to, if- you know, when- one of the things that pulled us into starting a new fund, and I- I bet you saw this as you were kind of going through your- your fundraisers as well, is this sense from founders that we want experienced investors that have time to spend with us. And we want- we want something new and fresh in the ecosystem, and I think that's a lot of what we're- we're trying to bring here.
- HSHarry Stebbings
Do you know what? As I get older, Mark... I'm sorry, it's the end of the day on a Friday, dude. Uh, like, no, I- I actually, I take the Keith Roid School of thought which is like, the best founders don't need you. I say to founders, "Listen, generally, 90% of VCs don't really add value. I try to be no different. But I'm a really nice guy, I will always have more money for you, and I have the world's best network. Other than that, Inshallah. But I will never be a bad investor for you, and I am super supportive."
- MGMark Goldberg
Uh, so-
- HSHarry Stebbings
And I think they love that. It's like, "Just don't get in my way-"
- MGMark Goldberg
(laughs)
- HSHarry Stebbings
"... give me fucking money, and shut up."
- MGMark Goldberg
So-
- HSHarry Stebbings
That's what they want.
- MGMark Goldberg
Uh, well, first off, I think that you would clear the bar for, you know, 80% of the industry by doing no harm, and I would agree with that principle. The other thing that I would agree with is at the later stages, that's all that matters. When you're doing it- when you're picking what growth investor you wanna work with, um, what you should care about is the price and them staying out of your way. I would disagree with you at the early stages. In my experience, over almost a decade of doing this, is that there are times even the best founders who are running autonomously, where- and I actually- there's a concept that we, uh, one of my great mentors, Mike Volpe, talked about, magic moments for a founder journey, where it's not about placing the IC, you know, employee 142, the resume in the right spot at the company. It's about building a relationship where when the founder is questioning, "Hey, I'm not sure if I'm working with my co-founder," and they wanna call you at 11:00 PM on a Saturday night, you pick up the phone, and you- you're there for that person. And when that company does well and they remember like, what were the important moments in my founder journey, I think those are the things they think about. So I- I- I would disagree with you at the early stages. I do think building that sort of trusted relationship, um, is- is ultimately what makes, you know, a- a- an excellent investor, though I would say a great investor might just be doing no harm.
- HSHarry Stebbings
I agree with you. I think there's- this is one of those ones where there's nuance, 'cause you're speaking from Silicon Valley, and I'm speaking from Europe. Our competitive sets and landscapes are very different. I guess my question to you is like, when you looked at that landscape, why were you like, "Ah, yes, (laughs) we should be here"? (laughs)
- MGMark Goldberg
(laughs) Uh, I mean, you know, when I joined, uh, Index Ventures almost a decade ago, um, you know, the pitch that I would give to founders when I didn't have a brand or a portfolio was, "I'm gonna out-hustle anybody else." And I remember some early deals where I would be going head-to-head with the equivalent of a- a Gil from 10 years ago, and a founder would say, "Why would I choose you? You're an associate. You have no experience." And I would say, "That's my advantage. My advantage is that your success matters so much to me that if this doesn't work, I don't have a job anymore." And that pitch didn't always work. I lost a bunch of deals, but I won a bunch of deals as well, because, you know, it's- it's- they're different products. That choice is good for founders. Our view with Chemistry is that the idea of having a small team, clean slates, that's playing offense at a moment when many people are distracted is a really interesting idea for- for founders that want that- that kind of relationship. And th- that's actually why we named the fund Chemistry.
- HSHarry Stebbings
I think the younger the founder, the more they want the brand is the lesson that I have. It's n- uh, different to what people think. People think younger people will take a new firm. Younger people, they crave the brand more. I find the second tier serial founders have had the multi-stage product before. They've seen that it's not all it's cracked up to be, and they actually go for the person th- the second time around. Do you agree or am I missing that?
- MGMark Goldberg
(laughs) So I would- I- I agree with the framework, though I don't think it's the age. I think it's the- the, um, the relationship to kind of insider-outsider in Silicon Valley. If you've never heard, uh, you know, if- if you're coming into the ecosystem and you don't really know a lot of venture, what you're thinking about is the big brands, the Andreessens, the Kleiner Perkins, the Sequoias, and you should. Those are the names that are household names that if you stopped a founder on the streets of Austin or Portland, you know, those are what you're gonna hear about. I think that's very difficult for a new brand to- to- to access from day one. Our strategy is, we've been in the industry for- for a long time. We've been on, I think it's, you know, 12, uh, unicorn boards from the early stage, 50 boards in general, 100 investments. There's a large blast ratio of people that we know that we've invested in, um, you know, people spinning out of our former portfolio companies. I think that's where a new fund is most successful, kind of in the network that already knows you. So I think, to me, it's less about the age and more about kind of the proximity to your kind of networks.
- HSHarry Stebbings
Doug Leone said to me, or I think it was on a
- 10:37 – 15:58
Is Venture Now a Low-Margin, Commoditized Industry?
- HSHarry Stebbings
show, he said that, you know, Vanture has transitioned from a high margin boutique community to a low margin commoditized industry. Do you agree with that transition?
- MGMark Goldberg
Well, first off, that's really interesting for somebody who is leading one of the multi-stage- the most successful multi-stage funds. And God bless Sequoia, I mean, their ability to innovate as a leader, um, I don't- I don't envy that challenge. I have always enjoyed being a challenger and punching in that direction. So for him to say that is a very interesting thing.
- HSHarry Stebbings
Can I push back and say, their funds are relatively constrained for what they do. Like, their seed fund is 190. I think their growth is like a billion. Like, they're not crazy. They- they- they're always collated in this, like, Sequoia raises eight billion and you're like, "Wow, another Softbank." But actually when you look at it, they are quite constrained products.
- MGMark Goldberg
So what I would say is I think the direction of the industry, and you- I- I'm sure everybody who observes the industry would say the same thing, has been one of industrialization in the last decade. And when I say industrialization, what I mean is the boutique experience of, hey, there's gonna be a handful of partners. You're gonna know everybody there and their reputations. That was kind of the past, and the future seems to be this sense of-... you know, let's increase the AUM, let's increase the team sizes. And I would challenge even you, Harry, to say, you know, at some of these big platforms, name more than three, four, or five partners when there might be 30 check writers. So that's what industrialization means to me, is when you, you know the name, the brand of the, of the institution, but you might not know who the check writers are.
- HSHarry Stebbings
But is chemistry a, like, a reversion away from that industrialization back to boutiqueness?
- MGMark Goldberg
That's exactly right. And it's, it's a contrarian thought right now. Inspired by funds like Benchmark, like USV, we think that there is this kind of personal relationship at the early stage that we're gonna try to reconstitute the fund around.
- HSHarry Stebbings
So how big's the fund?
- MGMark Goldberg
The fund's 350 million.
- HSHarry Stebbings
How did you come to 350 million being the right size fund? And stage-wise, this is seed and A?
- MGMark Goldberg
That's, it's seed and A. It's lead checks at seed and A, and it was really a bottoms-up exercise. We thought about what is the right pacing for each, each GP. And for us, when we looked at our investment history over the last 10 to 15 years, it was about two to three investments per year. There were years that, you know, in 2021, I did far more and, you know, uh, which was the wrong, uh, decision at that point. But when we looked at what was the right number, it was about two or three investments per year, and that's how we built the fund, which is, that's about the pace that each GP should have in the fund. Um, it's about a three-year fund and we'll have, you know, about 25 investments in each fund.
- HSHarry Stebbings
Do you think it's big enough for the A? Because if you think about series A funds, okay, if we take average series A check, we're like, say, 10 to 15 million. Let's say 15 to be con- 15 15s, we're at 300. Minus fees, that's your fund done.
- MGMark Goldberg
(laughs)
- HSHarry Stebbings
Not enough diversification and no seeds in that.
- MGMark Goldberg
So this will be a seed and series A fund. And I think when you say A, you have to be careful because when you say A, it's like, what does that mean? Um, I would argue, you know, I'm seeing As-
- HSHarry Stebbings
If, if you're doing, if you're doing Ilya from OpenAIs, it means a $10 billion check. (laughs)
- MGMark Goldberg
It means you're gonna need to raise a much larger fund. But e- even if you exclude the, uh, the, the, the handful of, uh, billion-dollar series A AI deals, um, you know, I think, uh, I'm seeing deals in the market that are 30 to $40 million series As. And I think one thing you have seen, or I've observed in the industry, is that As that would have been 15 million, you know, five years ago could be 30 to 40 million today. So when you talk about us doing a 30... We could do that from our fund, but it would be a very big swing. What we're looking at is, I would say, a click in front of that where it's not totally obvious that there's a category winner that's, that, you know, we are gonna have to roll up our sleeves before there's obvious financial traction. There's more risk at that point, but we think we can do some earlier kind of series As. So almost the concept of a serie A- series A I would argue is, it depends, you know, what you're talking about.
- HSHarry Stebbings
So what size check is that?
- MGMark Goldberg
I think I-
- HSHarry Stebbings
Just ideally.
- MGMark Goldberg
I, I think a 10 to $15 million lead series A check is a very reasonable thing, um, if you're willing to go a click earlier in terms of stage.
- HSHarry Stebbings
But does that work in terms of portfolio construction? Because with, uh, that's on assuming no reserves. You just don't have enough.
- MGMark Goldberg
So we have a very light reserve model. Um, and it actually, it, I, I, I think that, that might be worth clicking on. I think that the way that, um, you know, as a new fund we think about reserves is, is, you know, we believe that, um, supporting companies from those early stages is extremely important, but that peanut buttering all of your reserves in every pro rata round that gets done is not a good thing for either the founder or the LPs in a fund. And so we have a very light reserve model. We will double down on, on, you know, on companies where there's ex- you know, exceptions, but we have a very light reserve model.
- HSHarry Stebbings
I spoke to one of your LPs before, uh, and they were like, "Oh, well, like, they're, they're not competing against their old shops 'cause they're going a little bit before." And I was like, "Pfff, yeah." Like, I compete with the- all of their shops and I do pre-seed. Um, so they are competing. H- I- How do you think about that?
- MGMark Goldberg
So first off, we're gonna be competing, you know, uh, we're gonna be competing with everybody, and that's fine.
- HSHarry Stebbings
Yeah.
- MGMark Goldberg
I mean, this is an industry where you're both, uh, uh, working with people on one deal and competing against them in the next. But we are certainly gonna be competing tooth and nail in every deal that we're, we're in. But we think that's a great thing for founders.
- 15:58 – 17:50
Concerns Over Growing Seed Round Sizes
- MGMark Goldberg
Founders should have choice.
- HSHarry Stebbings
Do you worry about the expanded round sizes? Something that I am genuinely just concerned about right now is like, th- the amount of $8 million seed rounds where I'm having to stump up six for not a huge amount of traction at a pretty high price, and that's kind of becoming the norm.
- MGMark Goldberg
I think you have to play the game on the field. And the question is, are there good companies that are emerging right now in this vintage? I would say yes. Now, are there ridiculous deals happening that I don't think fit the risk-return profile for you or for me? Absolutely. But I think, you know, around that, there's plenty of work to do.
- HSHarry Stebbings
How do you determine when to pay up versus when to sit it out, like when it's just not a chemistry deal?
- MGMark Goldberg
So, um, the answer to that-
- HSHarry Stebbings
I look, I l- I loo- I, I look at like, my biggest mistakes-
- MGMark Goldberg
Yeah.
- HSHarry Stebbings
... this year have been Suno and ElevenLabs, and both of them I didn't do because they were small checks, probably like 1% each, and that didn't fit the model. And that was my lack of mental plasticity.
- MGMark Goldberg
Yeah. So I think one of the lessons I learned from Index Ventures and certainly two of my mentors, Mike Volpe, Ilya Fushman, was you wanna be in the category winner. And when you need to pay up to be in a category winner, that's something that I think a lot about. Um, you know, you don't want to be in the number two or the number three in a category. And there are times when I'm willing to take risk in that direction. Um, it's an ex- if, if your, your risk is the valuation but you feel extreme conviction and the, and the, you know, the leader in a, in a category, you know, that's, that's a time when I'm willing to kind of stretch. The other time, Harry, just before you jump in, and really the way I think about early-stage investing, is so much of a founder focus of, do I have insane conviction in this individual, in this founding team? And when those variables line up, I tend to, um, I tend to feel more confidence in my ability to kind of stretch on the deal price in terms...
- 17:50 – 19:37
Competitive vs. Non-Competitive Markets
- MGMark Goldberg
- HSHarry Stebbings
And you said about kind of the importance of being the category winner. I so agree with you there. It's like the 95% to one and 5% to everyone else in the market. I...Um, constantly oscillating. I don't like competitive markets, but then I consistently hear people say, "The best markets are competitive because there is incredible value at the end of them." How do you think about market competition? Do you like competitive markets or not competitive markets, and how do you think about my statement?
- MGMark Goldberg
I don't mind competitive markets. I think so much about, you know, ideas are a dime a dozen. You wanna find people that are excellent at execution and that have the vision to out-compete the folks in their market. I have never shied away from competitive markets. What I lean into is a founder who's willing to go head-to-head in a competitive market and I believe has the kind of chutzpah to go win it. Um, so for me, a competitive market validates the opportunity and is not something that I shy away from.
- HSHarry Stebbings
You said about execution being everything there. I so agree with you, dude. What are the reasons why, from zero to one, execution goes wrong most often, you see?
- MGMark Goldberg
To me, it's the founding team. I think that no company I've been a part of from the early days has been a straight line success. Everybody takes a punch in the face. And the founders that have the grit to take the punch in the face and get back up are the ones that I think have the highest correlation of going from zero to one, and ultimately from one to a public company. Um, so I think a lot about not, you know, did they, uh, um, did they miss their OKR by 30%, you know, this quarter and therefore this isn't gonna work? No. It's, is this somebody who's resilient enough to take the adversity, to learn from it? And the velocity of their learning is ultimately what crosses the chasm.
- HSHarry Stebbings
Well, I mean, I had Zak from Plaid on the show, and he said that OKRs at the early stage were just bullshit entirely. So, uh... (laughs)
- MGMark Goldberg
(laughs) I think you said that OKR... Uh, it was a great episode, and I think if you're saying, "Why were they lifted from the manufacturing industry and plopped
- 19:37 – 23:45
Why Does Execution Often Fail Post-Product Market Fit?
- MGMark Goldberg
down into the software world?" then I would, I would very much agree with that.
- HSHarry Stebbings
What are the reasons why execution breaks most post product-market fit? You've worked with some incredible companies post.
- MGMark Goldberg
I think hiring is, is probably the biggest limitation I've seen. When you're an early stage com- And this is where, you know, going back to our conversation on what is the value out of a VC, you know? Again, Do No Harm should be beating 80% of the industry, but I wouldn't agree with your zero. So I think that at every stage, and when you go, when you, you, when you, you feel the pull of product-market fit, you need to really consider who are the leaders of your functions, especially your go-to-market functions, and are they the right people? And when you move from founder-led sales into a professional organization, really asking yourself, "Do I have the right people in those seats?" And back to the point of, you know, what can a VC do to be helpful? Showing people what great looks like one, two, three stages in front of where they are and giving them a way to evaluate where their team is relative to that, I think is a very helpful thing. And the folks that I've seen take longer to get from that one to 10, 10 to 100 are the folks that tend to make the wrong decisions around hiring in their leadership teams. And by the way, I'm very bullish on... There are leaders, you know, uh, and I can give you examples, that have scaled from the early days all the way to, you know, an exit. Uh, it's unusual, but it's possible. But I think having a way to give founders, uh, a sense of this is what great looks like for your stage and, and these functions that you might not have seen before is a very important thing for them.
- HSHarry Stebbings
So I would say pre product-market fit. Also, everyone forgets how long hiring takes. It takes three to six months to find the person, three to six months to ramp them, and then 50% of the time, three to six months to fire them. And you've gone 18 months, and you've still got nowhere. And that's why I prefer serial founders, because they have an existing network. They've worked with Mark before. They know how Mark works. Sign Mark next week. He onboards a week later, job done, and he's fully ramped by, by week four. I then have so many people say, "But the naivety, the brilliance of first-time founders." How do you... I'm forcing you to pick one. Which one and why?
- MGMark Goldberg
First-time founders.
- HSHarry Stebbings
Why?
- MGMark Goldberg
I think the, I think the, um, the ability to, to think from a, uh, a clean slate, to do, um, foolish, potentially foolish, but on the other side, potentially visionary and transformative things. The hunger and the, um, the naivety that you described, uh, in a first-time founder, I think outweigh a lot of the benefits of having seen the show from one, two, three times in the past. There are caveats. I love founders that have tried and not broken through with a first business. So a founder who feels like they gave it a shot, but ended in a place that they weren't happy with and they have a chip on their shoulder, I think is a great profile. Um, a founder who has done so well, um, that, you know, they are financially independent or they might not have the same level of hunger that they brought to their first business, I- I- I'm, I'm less excited about that.
- HSHarry Stebbings
I love it when you get, like, a, a billionaire founder that comes back with, like, a healthcare company. (laughs) And you're like, "Ah." When, when you achieve, like, conquering enterprise SaaS and then you become, like, you know, a steroid bunny, you're like, "Yes, now I'm on, like, cholesterol prevention." (laughs)
- MGMark Goldberg
I mean, I don't think there's, like, a, a one... You, you forced me to choose. I don't think there's a one-size-fits-all. But I do, I like... I think people underestimate the energy from that kind of first-time naivety.
- HSHarry Stebbings
Founders should not choose chemistry if they want dot, dot, dot.
- MGMark Goldberg
If they want an established brand that's been around for 30 to 50 years.
- HSHarry Stebbings
Do you think that's still worthy?
- MGMark Goldberg
I think different founders want different things. You know, you and I talked about it earlier in the conversation. A founder that is coming new to Silicon Valley, that really wants the validation of a, you know, of an established fund that's been around, we're probably not a great fit for.
- HSHarry Stebbings
For founders listening, does the established brand... I don't think the established brand helps with hiring, 'cause I think it helps with hiring the wrong type of people. You want people who love the founder, love the team, love the mission, not love the fact that a big brand is in there. Does it help with customers?
- MGMark Goldberg
I don't think it helps with customers. I think it helps with funding. Um, you know, when Sequoia does a deal, there's gonna be money that follows it. And that's great. That's, that's a, that's a, that's a feature of the brand equity they've built over a long period of time.
- 23:45 – 29:37
What Was Mark’s Strategy for Organizing the Fundraise
- HSHarry Stebbings
Tell me. When you were doing the fundraise, how did you organize it? I know that sounds strange. But did you go to friends and family style first, people you knew who were super high likelihood? Or did you go for the anchors, big names first to solidify the base? Which approach?
- MGMark Goldberg
I think we tapped a rich vein in the LP community, that there was some frustration, especially at this point in the cycle, that some of the venture funds that they had invested in 10 years ago, 20 years ago...... they felt like had become asset managers, and the idea of being able to invest in a pure play venture fund that had experience but also a lot of hustle was something that we think resonated in the market. So I think we were fortunate that we, we kinda hit a market moment in the fundraise that, that aligned with a lot of the, the zeitgeist in that community.
- HSHarry Stebbings
When did you start the raise? Like, what type of time of year?
- MGMark Goldberg
We raised this summer. So went out from kinda June to August was our fundraise.
- HSHarry Stebbings
It's pretty quick, and in summer, it's even quicker.
- MGMark Goldberg
We were very fortunate. I think, again, uh, we were, you know, tapping into some real excitement about a team that... You know, I don't think there's a team of experienced GPs that's come together with three folks in quite some time, and I think that was something novel. Um, and again, at a time where the macro backdrop was a little bit of frustration with how big some of the multi-stage funds, the legacy institutions had become, and this sense that the returns you saw 10, 15 years ago from small teams and focused partnerships may not be the same going forward.
- HSHarry Stebbings
What size of check was the largest check?
- MGMark Goldberg
We wanted to keep enough diversity in the fund where we didn't get anybody, you know, kind of much over 10%. Um, and w- that was kind of where we adhered to. So we wanted about 20LPs and that's, that's pretty close to where we landed.
- HSHarry Stebbings
In terms of like LP construction, was there anything specifically that you wanted? I find some managers get a bit wanky about like, "Oh, we won't take family offices."
- MGMark Goldberg
No.
- HSHarry Stebbings
Uh, yeah.
- MGMark Goldberg
We wanted good people. I mean, it's so funny. There's so many... I, I, I, I feel like I have learned so much about being an investor from going through a fundraise. First off, I feel like every VC should have to fundraise just to be, uh, like table stakes as a VC. And in some ways, I think my order of operation was wrong, where I invested for almost a decade before becoming a founder. I, I, I wish, though it would have been difficult to have done in the opposite direction, but some of the learnings. So first off, there is so much empathy from having to pitch. You know, for a decade, I heard thou- you know, I sat on one side of the table and heard the pitches, and to be forced to feel the pressure of stepping into a room with everybody's eyes on you and you need to deliver is something everybody should do at, you know, in some regular interval to kind of balance the equilibrium of power. And I think... I don't know if you felt the same way, Harry, when you were fundraising, but for me, I felt tremendous empathy for that. And I'll just give you an example. I, you know, I think when you're pitching somebody, this is one of many meetings to them, and this is the most important meeting of your day. I mean, for me, there were a handful of, of, of, of meetings like that. And I've-
- HSHarry Stebbings
And do I have one-
- MGMark Goldberg
... been-
- HSHarry Stebbings
I had one meeting where I just couldn't stop sweating, (laughs) and that is just the most awkward, awful thing in a big meeting room with like 12 people, and you're standing at the front and you're like, "Oh," and everyone knows you're sweating and it's like, "Oh."
- MGMark Goldberg
Well, Harry-
- HSHarry Stebbings
Do it here.
- MGMark Goldberg
... a- as we know, it di- it didn't hurt your ability to do, you know, something incredible with your own fundraise. And in some ways, I hope it gave you a perspective, so when a founder is sweating in front of you, you have that empathy. And I... that's, that's a lot of what I felt this sense of, you know, "Oh, okay, this is, this is a really helpful reminder of what it takes to, to, um, to really put yourself in the shoes of a founder." I think the other thing is-
- HSHarry Stebbings
Did you-
- MGMark Goldberg
Yeah.
- HSHarry Stebbings
Did you raise money only from people you met in person? Were there any checks which were non-virtu- wh- which were virtual checks?
- MGMark Goldberg
That is a very good question, and I think that we met everybody in person. Because we're in San Francisco, a lot of people were coming through for different LP events, so there was a lot of kind of the community move through, but we hustled too. We spent a lot of time on planes. We were out there, it was a quick fundraise, but we were out there hustling very hard. Um, there were some... By the way, it's a great way to get to know your co-founders better. Um, you know, when we- we're an equal partnership, all three of us were, were telling our story. It's kind of like a group interview. And poor Christina and Ethan who had to suffer through me telling the same jokes and anecdotes, you know, over and over and over sometimes eight, 10 times a day, the fact that we didn't all... You know, my wife would have been mad hearing the same jokes all the time. And the fact that that brought us closer together was a really nice leading indicator for, you know, pun intended, the chemistry of the three of us.
- HSHarry Stebbings
Well, that- that's the Tokyo test. I don't know if you know this.
- MGMark Goldberg
I don't know this.
- HSHarry Stebbings
The Tokyo t- Okay, so the Tokyo test is can you fly to Tokyo with someone-
- MGMark Goldberg
(laughs)
- HSHarry Stebbings
... and be engaged fully in conversation throughout the duration of the flight? And if you can, that is either the sign that you should marry them or start a company with them.
- MGMark Goldberg
So we did not, uh, do the Toy- we did many, many tests, uh, throughout the relationship and the founding story of the three of us. The Tokyo test was not on there.
- HSHarry Stebbings
How many LP meetings did you take? Guesstimate.
- MGMark Goldberg
We probably took a hundred LP meetings.
- 29:37 – 31:12
What Was the Most Common Reason Investors Said No?
- MGMark Goldberg
with.
- HSHarry Stebbings
Okay, so you have a hundred and then say we end up with 20 there and they can... What was the number one reason in commonality wise why people said no?
- MGMark Goldberg
You know, it's, it's an interesting parallel to why we say no as GPs, um, and again to the empathy point, I think a lot of the reasons people gave as a no were not the actual reasons, but the, the biggest reason we heard was, "The three of you haven't worked together and there's a lot of teamwor- team risk and a new fund at this size with three people." To their credit, there is risk. I feel very comfortable with that risk. Um, but I think some people, you know, in the same way that a VC might say, "It's too early for our fund," you know, you never really know what people are thinking.
- HSHarry Stebbings
Did you push back when you felt, like, they weren't giving you the right feedback? Like, I, I of course got nos and I of course got kind of bullshit ones. And I would always say like, "I really appreciate your desire to protect my feelings, but I really want to get better above everything else. Please tell me the real reason why you said no." (laughs)
- MGMark Goldberg
We did. Yeah. And we got some great... I mean, ah, a- again, back to the parallels of L- being a good LP is very similar to being a good GP. The funds that we most liked working with, whether or not they invested or not, were clear, direct, communicative, gave real feedback. It's a good, it's a good lesson for me, it's a good lesson for anyone on the GP side, and again, why I would encourage anybody to go through a fundraise like we did where, you know, those things were the things that were... You know, when we tell our friends what are the best LPs, it wasn't the ones that necessarily all said yes to our fund, it was the ones that were great to work with and they were great to work with for the reasons. They gave great feedback. They were very sophisticated on their perspective in the market. Whether or not we aligned with that vision, you know, that was what made a great LP, and I think ultimately what makes a great GP.
- 31:12 – 33:46
Best & Worst LP Meetings
- MGMark Goldberg
- HSHarry Stebbings
What was the single best LP meeting that you had?
- MGMark Goldberg
We did have some funny stories from the fundraise itself. And at one point, I remember, um, Christina was having what I thought was her best fundraising meeting. She's just, just, you know, really doing a nice job with her talking points and I look over and she's, she's... and she's, you know, laughing and having fun. And I look over and it's, it's nine o'clock in the morning and instead of a seltzer water, we had, we had, you know, we're borrowing somebody's ............................ She had grabbed a White Claw instead. And so she's drinking, you know, her second White Claw thinking that she's drinking seltzer water. And, uh, you know, we had a few things like that where, you know, you just kind of have to laugh in hindsight and we had to, we had to tell her afterwards, you know, we didn't want to stop the train at that point, but we had to tell her she wasn't drinking, you know, something that was, uh, that was seltzer water. So...
- HSHarry Stebbings
Mark, did you have any terrible ones?
- MGMark Goldberg
The terrible ones were more misalignment, I would say, where we would get into a meeting and someone would ask us to pitch venture capital as an asset class. And we had one or two of those where it was like, "Why is this asset class still worth investing in?" That was more, again, uh, an alignment challenge where, you know, if you're starting from that question, we're probably not in the right conversation, and we did have a few of those.
- HSHarry Stebbings
Did you find one group more sophisticated, intelligent than others? Foundations, endowments, family offices?
- MGMark Goldberg
But one of the best piece of a- advice we got was build a diverse set of LPs and not in terms of the institutions you just described, fund to fund, family office, uh, you know, uh, uh, endowments and foundations, but people that, you know, think differently and think independently. And that's why I think we ended up with such an interesting mix of people that, you know, almost... we, we almost didn't want people to, to correlate with one another. And I think it would have been very easy to do and for people that, that, um, that, that go this route, um, where there's a lot of correlation between, hey, these are all alumni of the same institution and so they're going to group things together. We wanted to avoid that, and I think we're very fortunate we were able to.
- HSHarry Stebbings
I'm gonna push you. What single LP check meant the most to get? To you, personally.
- MGMark Goldberg
So we had a few groups that told us, you know, "This is gonna be a six-month process. You know, there's no way to accelerate it." And after the meeting, we're kind of done in two weeks. And we loved that kind of speed to conviction and that meant a lot. Some of those early conviction checks where, you know, we weren't sure exactly how long the fundraise would take. And having a few people say like, "We believe so much in what you're doing. We're gonna make exceptions to do this quickly and to get behind you." That was a very important moment in our fundraise and, um, and something I won't forget in terms of, you, you know, kind of the speed at which people moved.
- 33:46 – 38:18
Most Recent Disagreement as a Parnership
- MGMark Goldberg
- HSHarry Stebbings
What was your most recent disagreement as a partnership?
- MGMark Goldberg
This wasn't the most recent disagreement, but a really substantive disagreement. Was about whether or not to build a junior team at Chemstry.
- HSHarry Stebbings
Mm-hmm.
- MGMark Goldberg
Um, that was a real-
- HSHarry Stebbings
Why did that, why did that net out?
- MGMark Goldberg
We, we are doing it, but I'll give you some of the color around it. So, I came in with more perspective, um, that we need to be extremely streamlined and that, you know, having a, a GP-only group is going to be, you know, a, an advantage in, in terms of the, the ecosystem. I think Ethan and Christina had a much stronger feeling that, that working with, with, um, with a junior team is going to add an element and a, and dynamic element in terms of different ages, different networks, that's really gonna complement the GPs. What all of us were aligned in not wanting to recreate was the hierarchy and institution and bureaucracy of a really large organization. So what we netted out to is just a very small junior team. We're gonna have two folks. We've hired one so far who's fantastic and already making a, a massive impact on the fund. Um, so we, we kind of... But that was something we really needed to unpack and, and try to think about the pros and cons.
- HSHarry Stebbings
Are you doing office? Are you doing remote? And are you can-
- MGMark Goldberg
Office, in office every day. It's a really important tenet of how we think about building. You know, we're a new team. We're a startup, right? Like, we need to be shoulder to shoulder.
- HSHarry Stebbings
If you could choose anyone to join as the fourth partner, who would you choose and why them?
- MGMark Goldberg
There are a lot of good people in the ecosystem. Some of the folks that I respect immensely are the Accel Venture team, Dan Levine, Vaswath Natarajan, some of the folks that I would describe the similar age to the three of us. They're, you know, that are doing a tremendous job in the ecosystem. There are some funds that I would consider new guard funds that are a s- you know, a, a little bit in front of us. I think Sarah Guo has done a tremendous job with Conviction.
- HSHarry Stebbings
Mm-hmm.
- MGMark Goldberg
Jack Altman doing amazing things with Alt Capital. It's probably the most dynamic moment in 20 years in venture, where you have these legacy institutions that are dealing with generational change, you know, huge portfolios, um-
- HSHarry Stebbings
I, I definitely said this to LPs, which is like, I think funds is very much fund investing is like, you know, a company investing in a couple of ways. One, the best fund managers are like the best founders. They make you feel a little bit uncomfortable with their intensity.
- MGMark Goldberg
Yep.
- HSHarry Stebbings
You know, we've, we've said this before, but Nikolai at Revolut isn't always the most calming influence.
- MGMark Goldberg
Yes.
- HSHarry Stebbings
(laughs) And then, you know, second, there needs to be a why now. I- there needs to be a moment in the ecosystem that causes this company or fund to be more exciting today than it was yesterday. And I completely share the perspective there. I do worry there's just too much money in this ecosystem though. A- and for me, dude, the cost... You know, I, I lost a deal this week, uh, and I lost it because the competition doubled the price and accepted common shares.
- MGMark Goldberg
... yeah. I think both can be true. I think there can both be a shakeout that is already happening in terms of the amount of dollars, and I think there can be a turnover between an old guard and a new guard. And I think you and some other funds I respect represent that next chapter and what a new guard. But I think there's a moment, and I don't think that moment existed three years ago, five years ago, even 10 years ago, and I think it's happening now.
- HSHarry Stebbings
Are you worried by the extended window of privatization, by great, great founders like the Collisons bluntly just continuously being private for years and years and years?
- MGMark Goldberg
No, I'm not. First off, I think products will evolve to create liquidity for those late-stage private companies that give liquidity options to early-stage investors. So I think the market will evolve. So just because companies are staying private longer doesn't mean I think the liquidity duration will be as long as it is today. I think there'll be, we'll see innovation in that area. Um, so there'll be more secondary opportunities for early-stage inv- I mean, m- my belief is the capital markets will, will create new products to solve for that. I do think that you need to have a long-term outlook in this industry. And, you know, even when, when I started fundraising, I thought the duration of a fund was 10 years, and I was surprised to learn that many of the LPs said, "We rarely see closed funds before 15 years." And, you know, that's, I think, uh, just you have to have kind of the stomach to be in this for a long time.
- HSHarry Stebbings
Have you had your first salary check yet?
- MGMark Goldberg
I have.
- HSHarry Stebbings
When did you get it? What year?
- MGMark Goldberg
You know, I was very fortunate to join the venture industry at the end of 2015, early 2016, um, and I'm very grateful to, you know, to have been at a, at a fund that, that did really well in those vintages and was able to get some liquidity. So, um, you know, I'm, I'm fortunate that I, I've seen that.
- HSHarry Stebbings
Okay, I'm gonna make a statement. You can agree or not. I don't think many of the 2021 vintage funds will return 1X. Agree or disagree?
- MGMark Goldberg
What I would say is I don't think those funds will do very well. I mean, the, the vintage is gonna be very, very challenged. Um, will it be a 1X? I don't know. I think it'll be better than a 1X, maybe n- you know, but it's, they're gonna be,
- 38:18 – 40:27
What Happens to Companies with Overinflated Valuations by Multi-Stage Funds?
- MGMark Goldberg
they're gonna be tough funds.
- HSHarry Stebbings
What happens to all the companies that are marked up insanely highly with insane valuations by many of the multi-stage funds and are worth 2 billion, 3 billion, not 10 billion?
- MGMark Goldberg
I think we're already seeing some of the oxygen being sucked out of those companies. I think, you know, as you talk about your frustration with founders choosing to kind of raise at terms that feel unreasonable, I think we're seeing the other side of that, which is many companies wish that they'd taken a more graduated approach to their fundraising. Because the momentum, the cultural momentum, and I, I've got some companies that, that have been very thoughtful in this and deliberate in this effort. The momentum you lose when a fund, when the employees know that the valuation isn't realistic, I, I think really hurts the morale and hurts the ability of the com- company to kinda do its best work. So I think really deliberate founders that don't overstretch actually, you know, you're kind of seeing the advantage of that. But everybody has to kinda go their own path, so...
- HSHarry Stebbings
I, I kind of have this new approach, which is I say, "Listen, I will let you choose the price," and they're like, "What?" And I'm like, "There's just one clause. Whatever price you choose, you have to be 90% confident that you can 3X that by the time you're gonna raise your next, and if you don't, I'm gonna be pissed."
- MGMark Goldberg
Yep. How's that working for you?
- HSHarry Stebbings
Honestly? Founders love it (laughs) .
- MGMark Goldberg
(laughs) Are you seeing bigger or smaller numbers than you expected?
- HSHarry Stebbings
Smaller.
- MGMark Goldberg
I mean, that's amazing.
- HSHarry Stebbings
'Cause they're, 'cause they're like, "Oh, shit, the 25? I don't know if we'll be w- 75 when we're one million in ARR." And so, the, the, especially at seed, I'm seeing the-
- MGMark Goldberg
Yeah.
- HSHarry Stebbings
... 25s go to 15s.
- MGMark Goldberg
Yeah.
- HSHarry Stebbings
'Cause they're like, "I could do 45-
- MGMark Goldberg
Yep.
- HSHarry Stebbings
... but really confidently predicting 80?" It's quite hard.
- MGMark Goldberg
Yeah. I mean, I think it at least changes the, the tone of the conversation from one of, "This is a zero-sum game where the valuation is a reflection of my self-worth and I'm," and kind of a scoreboard win, to one of, "Let's put this in the perspective of a long-term journey." So I think it's y- y- you know, I think it's a really interesting framing you're giving the founders of, you know, th- let's think about this in a different way.
- HSHarry Stebbings
It's, it's, I'm not literally letting them choose the price, but it, it, it's-
- MGMark Goldberg
No, of cour- of course, but it's a little bit of mental jujitsu which I will, uh, I will think hard
- 40:27 – 44:22
Investing in AI Today
- MGMark Goldberg
on.
- HSHarry Stebbings
How do you think about bluntly investing in AI today, given rounds being the sizes that they are, being the competition being what it is? How do you think about that?
- MGMark Goldberg
So I think we're already seeing kind of the m- the, the, the oxygen in this bubble kind of start to get sucked out. Now, obviously there are exceptions. There's still some extremely unreasonable deals happening within AI.
- HSHarry Stebbings
What makes you say that we're seeing the oxygen sucked out? 'Cause I don't, I don't see that.
- MGMark Goldberg
Uh, I, I, I think that just calling yourself a .AI company is no longer tacking the same premium onto your business as it would've a year and a half ago. Um, and the people that were the same camp of founders that were a .XYZ during the crypto boom that have migrated to .AI for the AI boom are starting to recognize that they actually need a sustainable business, and that's what they're gonna be evaluated on. Now, that doesn't mean that there aren't rounds happening at the, you know, the red hot center of the AI infrastructure ecosystem. Um, but I do think they're starting to, you're starting to see some pullback and some, some proportionality brought back into the other side of the market.
- HSHarry Stebbings
So when you talk about-
- MGMark Goldberg
Doesn't sound like you're seeing that, by the way you looked at me.
- HSHarry Stebbings
No. Honestly, I see it being more crazy than ever.
- MGMark Goldberg
Hmm.
- HSHarry Stebbings
I mean, I, I met three companies that raised at north of 750 pre-product. How do you structure decision-making as a new firm?
- MGMark Goldberg
So we are a single-trigger model, which means that any one of the three of us can make a decision on an investment and go with it. Um, now, the biggest mistake that I have seen from kind of other, you know, from my own personal experience and from other funds is when you try to make consensus decisions at the early stage, I think you end up with consensus funds. And I think it's the errors of omissions at the early stage where one person or two people have super strong conviction in an idea that end up being the outliers. So if you think about the outliers, you're gonna get, you know, when you open the aperture, you're, when you've got kind of the decision framework that I just described, you're gonna get both. You're gonna get deals that don't do as well, but I think you're also gonna solve for the extremes that do very well. And that was the model that we, we landed on.
- HSHarry Stebbings
You mentioned the sin of omission there.What mess weighs on your mind most?
- MGMark Goldberg
Chime. I really love that business. Uh, from a fintech perspective, it was one where, um, you know, I would have loved to have been a part of the early stage rounds. And, and kudos to the folks that, that figured that out earlier than I did. Um, I, I think it's-
- HSHarry Stebbings
Why is, why is Chime a third the size of Revolut, in a market that's, you know, five times bigger?
- MGMark Goldberg
I think nobody has really cracked the product velocity that Revolut has. I mean, Revolut's product velocity is, is just unparalleled in really any market at this point, including New Bank. Um, and, you know, you could argue the US is a harder market to differentiate on features, but Revolut has had a superpower and, you know, they just move so quickly in terms of the breadth of products they're able to offer its customers. I don't think anybody's been able to match that in the US. That said, I think a lot of people get consumer finance wrong in the US, and say, "Just because nobody has built a Revolut-sized business, means that it's not gonna happen." Actually, the last time I was on your show, I think I predicted $100 billion dollar neobank coming out of, you know, somewhere. And I think we're a lot closer. I think Revolut's the closest we're gonna see to that.
- HSHarry Stebbings
Absolutely agree with you. I think Revolut is that. But I would actually place a lot bigger bet on Revolut taking the US than Chime.
- MGMark Goldberg
We'll see. Um, I, I would argue that there might be a company nobody's ever heard of yet that actually wins the mantle.
- HSHarry Stebbings
Can I ask you, do I miss- I, the joys of doing what I do is I just get to ask smarter people things that I, I don't know. Uh, you know, we have Mamoun on the show. Uh, eh, he, you know, just lost Tally. Very, very, you know, brilliant founder, Jason, but difficult business in the lending business. And he, his lesson he told me was just that lending's really, really hard. Is lending just an uninvestable category?
- MGMark Goldberg
I think in, lending businesses are very, very, very challenging. And if you look at the, the, the way that I've been comfortable investing in fintech, it's mostly been through the infrastructure that supports the growth of, you know, digital
- 44:22 – 48:47
Meeting an Amazing Founder in a Bad Market
- MGMark Goldberg
finance.
- HSHarry Stebbings
What do you do when you meet an amazing founder in a shit market? Where you're like, "Oh, I hate this."
- MGMark Goldberg
I, I do it.
- HSHarry Stebbings
"I hate l-"
- MGMark Goldberg
I, to me, it's a very obvious answer. I, I would, I would go all in on it. Um, I, I, and that would in- that would include lending as well. Um, it gives me heartburn, but at the early stage, the stage I'm investing at, the stage that's the core to Chemistry, you know, finding great people at this stage, they're going to iterate into something that's interesting. And again, please take the other side of it. Uh, you know, even in my partnership, you would hear, Ethan's much more markets-focused than I am. But for me, great founders figure out a way to create market. I mean, if you look at, you know, I was very fortunate to see some amazing companies from Index from the early days, whether it was a Figma, whether it was a Whiz, whether it was a Datadog. Companies that, you know, have been able to build TAM by just increasing the surface area of their products. I mean, that's, that's the lesson I draw from some of those businesses that I've seen from the early days.
- HSHarry Stebbings
My question to you is, what other markets are you like, "Ugh"? Like for me, recruitment software.
- MGMark Goldberg
(laughs)
- HSHarry Stebbings
Ugh, ugh, no. And like, honestly, I'm really sorry, education. EdTech just fucking sucks.
- MGMark Goldberg
Okay, so-
- HSHarry Stebbings
It sucks.
- MGMark Goldberg
... it's funny, we just looked at a recruiting software company coming. So I'm just laughing about that. But what I would say is, one of the dangers of experience, and having done this for almost a decade now, is, is shutting your brain off for a category that didn't work in the past. So I have a little bit of an allergic reaction when you say that. Not because I disagree with you in any of the specifics, but in the sense of, I think what's very ... a trap that people fall into, and this happened in fintech. If you look at the evolution of fintech, in fintech, the, the most knowledgeable people were a bunch of the East Coast funds that knew, that come, had spent two decades inside of financial institutions, and knew the market way better than the West Coast funds. And they outsmarted themself from every money-making deal in the category, the, the really, really big ones. And the West Coast funds, that had the naivety to lean in, I think still did really, really well, so-
- HSHarry Stebbings
I would say the smartest in fintech are Matt Harris and Miki Malka.
- MGMark Goldberg
Yep. Listen, though, I mean, uh, I-
- HSHarry Stebbings
And they've made a fuck-ton of money. (laughs)
- MGMark Goldberg
... what, what I would say is, Matt, Matt Harris is, is probably the, the, the smartest and best fintech investor out there. I mean, you know, Ribbit's obviously incredible as well. But Matt Harris, I think, you know, has kind of set the direction of fintech for a very long time. But what I would argue is like, that knowledge can be counterproductive as well. If you know too much ... Because the, the crazy ideas are crazy, right? Like, they, (laughs) you can, you can out-think yourself from any good Series A by overthink- ... I've done it myself, I've seen other people do it, and I think knowing too much can actually be dangerous.
- HSHarry Stebbings
So what industry are you like, "Brr" ?
- MGMark Goldberg
Sales tools. I mean, like-
- HSHarry Stebbings
Mm.
- MGMark Goldberg
... the, the next, uh, you know, the next, uh, AI for sales tools, uh, company, I have a very hard time, you know, keeping an open mind at this point. Um-
- HSHarry Stebbings
I did, I did 11X. That was-
- MGMark Goldberg
You mentioned it at the beginning. Listen, it's, I know how well they're doing, but I, I, I just have a hard time, you know, seeing ... I, I've just heard the pitch so many times. There's a lot of, uh, of activity that I don't think is gonna go anywhere there.
- HSHarry Stebbings
How do you turn people down? Do you say the honest truth, or would you rather gloss it over because there's no point being that honest and blunt?
- MGMark Goldberg
My answer to that question has changed by fundraising myself. There were a lot of times where it was mor- it was easier as a, as a VC just to say something polite to, to, to not give people the real feedback, um, that I've done in my career. Um, and having been on the other side of a fundraise, and now felt the other direction, I think it's really helped me understand how useless that is, and the importance of giving strong, constructive feedback. Um, so I, I feel very strongly about doing that.
- HSHarry Stebbings
The other big change though in you is you've moved from a multi-stage fund, where you have to preserve optionality, and you have to keep them onside. It is much nigh-
- MGMark Goldberg
Harry, that is such a good point. That is such a good point. Because you can be wrong and right at a multi-stage fund. When you're doing-
- HSHarry Stebbings
That's it.
- MGMark Goldberg
... what we're doing at Chemistry, you get one bite at the apple, right? And that is, that's actually, for what it's worth, that's a new muscle for me. Um, but it's also really empowering, and it's, it's one of the reasons I'm having so much fun right now, because it focuses you in a way that I had not done before, where the, the, the, the da- the danger of the optionality of being able to do every stage at every time is you have to keep so many doors open. There is something that, that focuses the mind by saying, "This is the stage we're doing, and this is the stage we are not doing." And therefore, kind of giving yourself the, you know, kind of the test of conviction of where you are, and then being able to kind of adapt and, and change the operations around that.
- 48:47 – 50:57
What Mark Compromises First: Check Size or Ownership
- HSHarry Stebbings
What will you break first, or more willingly, check size or ownership?
- MGMark Goldberg
The check size. It kinda goes back to my sense of you have to be in the winners. Um, and I- I think that when we feel like we are, you know, in a winner, um, you know, I'm- I'm willing to- to move up on check size, um, to be, to be a part of those companies.
- HSHarry Stebbings
What's your capital concentration limit on a per company basis?
- MGMark Goldberg
I can't remember what legally we, we have as the concentration limit. But certainly we don't want more than 10% of the fund in a single company.
- HSHarry Stebbings
It's interesting, I, I remember Brian Zingerman said to me on the show that the enemy of great venture returns is capital concentration limits on a per company basis, and he mentioned that they have 30% in some funds just for one company.
- MGMark Goldberg
Listen, if it's the right company, that's incredible. That would, I would have a hard time sleeping at night with that sorta concentration. Um-
- HSHarry Stebbings
So would I.
- MGMark Goldberg
(laughs) Yeah, so, but, um, you know, I think that-
- HSHarry Stebbings
But if it was Airbnb, I'd probably sleep better.
- MGMark Goldberg
Then you're sleeping just, just great.
- HSHarry Stebbings
Yeah.
- MGMark Goldberg
Uh, but you're probably sleeping on a yacht in Saint-Tropez. So-
- HSHarry Stebbings
Mm-hmm.
- MGMark Goldberg
... um, you know, it's- it's different. But I- I- I think, like, having some sense of perspective. But listen, I think one of the advantages of being a new fund is taking a lot of risk. I think we are gonna try a bunch of things that don't work, and I'm totally comfortable. I'm excited for that. Like, we should be doing all sorts of things and seeing how do we push the innovation in this industry, and I think that's gonna create a better founder experience, even when we get it wrong.
- HSHarry Stebbings
If I were to give you just one bit of advice, people, and that no one, everyone will tell you the opposite, don't be afraid to do brand deals where you do get into brand names with tiny ownerships. The most important thing is that you align yourself with incredible founders and incredible companies in this new era, especially in this new era of AI. Just get into some great companies-
- MGMark Goldberg
Yeah.
- HSHarry Stebbings
... and be aligned with them.
- MGMark Goldberg
Funny enough, we had some LPs say exactly the same advice, which was one of our more surprising moments from our fundraise, where some of the LPs said, "You know, listen, it's that important that you're in some of these brand deals to be able to establish yourselves, and don't be afraid to lean into that." We had other-
- HSHarry Stebbings
Wow.
- MGMark Goldberg
We had, we had LPs say exactly the opposite too, but it was interesting that even the LP community was, there are positive externalities from being in these- these, you know, these winners, and, uh, and you should be willing to kind of compromise
- 50:57 – 56:07
Quick-Fire Round
- MGMark Goldberg
to do that.
- HSHarry Stebbings
100%. Listen, my friend, are you ready to do a quickfire?
- MGMark Goldberg
Yeah, let's do it.
- HSHarry Stebbings
So who outside of chemistry do you learn most from in the venture industry?
- MGMark Goldberg
The person I learned the most from has been Mike Volpe. Um, just a tremendous mentor to me at, at Index Ventures, and, uh, somebody I continue to call regularly for advice as, as I'm kind of navigating kind of our- our new fund and next chapter.
- HSHarry Stebbings
What would you most like to change about the world of venture?
- MGMark Goldberg
I would change the group think. I think it's bad for founders. And, uh, I saw a great meme go around yesterday of, you know, uh, a- a cheetah, an airplane, a rocket ship, and then the speed at which venture gossip moves between associates, and that resonated with me. Um, I wish there was a little bit more independent thinking in the industry.
- HSHarry Stebbings
One thing I do say to founders is, like, you are either fundraising or you're not nowadays, sadly. What WhatsApp groups have changed is the ability for associates to communicate very, very fast with large groups that actually, "Oh, I met Mark. He wasn't great, and actually, they're not even at half a million in ARR, so we turned it down." It can really damage a raise when you're not even raising.
- MGMark Goldberg
I agree. I think you're totally right. I- I- I think p- companies need to be very cognizant of those d- dynamics.
- HSHarry Stebbings
What do you most need to change in yourself as an investor to be better?
- MGMark Goldberg
Um, I think giving, uh, um, you know, really thinking about how I spend time and reorienting it 100% towards playing offense is- is a, is a new skill for me right now, um, after having been at a large firm.
- HSHarry Stebbings
Do you think that's even possible, dude? I mean it nicely, but, like, you get board seats, uh, y- y- you, portfolios accumulate. You can't. You have team members.
- MGMark Goldberg
Uh-
- HSHarry Stebbings
They have culture, morale, promotions.
- MGMark Goldberg
Uh, so, so, uh, you can't forever. You can when you have a clean slate from day one. So you don't have it forever, but I have it now. It's amazing. I feel like I'm running with a jet pack on my back right now. It is a tremendous feeling, and it's probably, you know, what you felt for your fund one before you'd made an investment. I mean, that's the- the level of, you know, kind of energy and- and kind of the juxtaposition from, you know, carrying a, you know, a very heavy board load and portfolio load and going to that. So you're right, it's not infinitely scalable, but it's very exciting right now.
- HSHarry Stebbings
Okay. You can invest in a seed firm, a series A firm and a growth firm. It can't be yours or mine. Which would you invest in?
- MGMark Goldberg
I'd take the series A fund. I think it's the best risk-return in the market.
- HSHarry Stebbings
No, no, you have to do one from each. So like, mine would be-
- MGMark Goldberg
Oh, okay, pick- pick the fund?
- HSHarry Stebbings
Uh-
- MGMark Goldberg
Oh, this is a good one. This is a good one.
- HSHarry Stebbings
So mine would be like Cyberstart at seed.
- MGMark Goldberg
Okay.
- HSHarry Stebbings
Or Niko at Adjacent. A, it would, it would have to be Benchmark.
- MGMark Goldberg
Yeah.
- HSHarry Stebbings
And then growth, I'd do Thrive.
- MGMark Goldberg
So growth, I would do Maritech. I think they're doing extremely interesting work right now. Um, series A-
- HSHarry Stebbings
And their constrained fund size for growth.
- MGMark Goldberg
And their constrained fund size for growth, and they're, they're just doing some really interesting work. So I'm a huge fan of- of kind of the strategy and the people at Maritech as well.
- HSHarry Stebbings
They've nailed generational transition with Alex, Max, and Max.
Episode duration: 56:17
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