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Nico Wittenborn: Consumer Subscription Apps; Using Evolutionary Biology to Invest; Solo GP's | E1017

Nico Wittenborn is the Founder of Adjacent, one of the best early-stage firms created over the last 5 years. Before starting Adjacent, Nico spent over 3 years at Insight Partners in New York and before that learned the craft of venture from some of the best in early-stage, Point Nine, where he spent over 4 years. Nico’s portfolio across funds includes the likes of Revolut, Chainalysis, Oura, RevenueCat and PhotoRoom to name a few. ----------------------------------------- Timestamps: 0:00 Intro 1:22 Nico Wittenborn: From Insight Partners to founding Adjacent 8:35 Consumer Subscription Apps 24:22 The State of the VC Market Today 29:22 Deep Dive on Adjacent 48:27 The Rise of Solo GP’s 55:21 How I Use Evolutionary Biology to Invest 59:56 VC Market Predictions 1:10:29 Life Advice from Nico 1:16:46 Quick-Fire Round ------------------------------------------ In Today’s Show with Nico Wittenborn We Discuss: 1.) From Selling Mobile Phones to Leading Early-Stage Investor: How did Nico first make his way into the world of venture with Point Nine? What did Nico learn from his time with Point Nine and Insight? How did his time at each impact how he invests and runs Adjacent today? What does Nico know now that he wishes he had known when he started investing? 2.) Is Consumer Subscription Even a Good Place to Invest? With Calm ($2BN) and Duolingo ($6BN) as the market leaders and there only being two of them, is consumer subscription even a good place to invest? How does Nico pushback that retention for consumer subscription apps is so bad? What do many not see about consumer subscription retention numbers? How does Nico respond to the challenge of high customer acquisition cost and navigating challenging platform shifts in advertising, when investing in consumer subscription? What will the consumer subscription landscape look like in 5 years time? 3.) Adjacent: The Fund, The Strategy: Why does Nico believe if your fund model relies on $10BN outcomes, you are in trouble? How large is the latest Adjacent fund? What does the portfolio construction look like for the fund? How much diversification is the right level of diversification? How many companies per fund? How does Nico think about capital concentration on a per-company basis? What are Nico’s ownership requirements? How have they changed with funds? What is it about Nico’s structure which enables him to be more collaborative than others? 4.) Nico: The Investor: Lessons: How does Nico reflect on his own relationship to price? When does he pay up? When does he not? What has been one of Nico’s biggest misses? How has that changed his approach? Why does Nico not really compete with the large multi-stage funds? Why is Nico deliberately trying to reduce the amount of companies that he sees? 5.) The Future of Venture: How does Nico analyze the rise of solo GPs? What are the biggest pros and cons of the model? Why does Nico believe the large generalist funds are in trouble? Who is set to win and who is set to lose in the next 10 years of venture? Which seed firm would Nico invest in? Which Series A firm? Which growth firm? -------------------------------------------- #NicoWittenborn #Adjacent #HarryStebbings #20VC #venturecapital #consumersubscription #business #investing

Nico WittenbornguestHarry Stebbingshost
May 22, 20231h 29mWatch on YouTube ↗

EVERY SPOKEN WORD

  1. 0:00 – 1:22

    Intro

    1. NW

      There's this term in evolutionary biology called the adjacent possible. And what it says is evolution happens usually as a combination of the existing phenomena and in a relatively deterministic way. So like transformers being developed somewhere within Google, somebody taking that, building that up, and creating OpenAI, then that actually becoming consumer subs application that charges 20 bucks a month, (laughs) with ChatGPT, those things altogether create the breakthrough. If you ask somebody on the street, they're like, "Overnight, AI was created, and it's living in this bot," certainly this was not the case. There were very specific steps leading to this outcome that is now perceived as happening overnight. And this can be technically like the example I just brought, but it could also be behaviorally or, um, socially, like Calm for meditation. Meditation was not as mainstream as it was when we invested, right? And so I- I try to identify these changes and then think about which companies could create a category around that.

    2. HS

      Niko, I am so excited for this. It was 2015 when we last sat down together.

    3. NW

      Yes.

    4. HS

      I cannot believe it's been eight years. But thank you so much for joining me today.

    5. NW

      Thanks for having me again.

    6. HS

      Now, this will be one of the best shows we've done because we're just gonna shoot the shit. We're gonna start as usual. I want to know how did you get into venture first and just set the stage there.

    7. NW

      Yeah.

  2. 1:22 – 8:35

    Nico Wittenborn: From Insight Partners to founding Adjacent

    1. NW

      Um, so I started my journey in high school, not in investing, but in the first step towards, um, investing, which was I imported iPhones from the UK, unlocked them, refurbished them, resold them, which then really opened my eyes to entrepreneurship, one, and two, some of the money I made there (laughs) I invested in Apple stock-

    2. HS

      (laughs)

    3. NW

      ... in 2008 and '09, which, um, I guess taught me two things. One, you can make money online. Two, if you believe in something and you put the money behind it, then that can work out for you. I didn't... You know, it was very little money, and I- I actually took it out pretty soon after for a vacation with a girlfriend-

    4. HS

      (laughs)

    5. NW

      ... at the time. But it was still, it was still, you know, the learning was there. And so I... At the time that this was happening was at 2008, and when I started studying, I read about a group in Berlin called Team Europe.

    6. HS

      Hmm.

    7. NW

      They were a company builder, um, pretty similar to Rocket, smaller. They built Delivery Hero-

    8. HS

      Mm-hmm.

    9. NW

      ... a couple of other outcomes, and they had a small seed fund on the side with €6 million, and that was managed by Pawel, who was later one of the founders of, um, Point Nine. And so I reached out to them, sent them a cold email, asked if I could do an internship. This is in 2010. And Pawel got back to me and, um, came to visit a town close to where I was studying in Germany, and I had a conversation with him. He liked what I did with the iPhones. I actually just had invested in a company called ƒ4kauf, and that was that model but on a bigger scale, venture-funded. I was just one person. Um, and so I think we hit it off, and he offered me an internship. I worked with him, um, for a couple of months and then continued working for them part-time as I finished my studies in 2011, 2012. And then when I graduated university, they decided to spin out this fund of Team Europe, and Christoph, who was an LP in the fund, joined as a co-founder, (laughs) and they started Point Nine. Um, and I was just, you know, the young kid that was around-

    10. HS

      (laughs)

    11. NW

      ... and lucky enough to be the first person to, to work with them long term. And so they were still raising the, the first institutional fund, um, which was the one after the €6 million seed fund as part of Team Europe, and I was just thrown in, really trying to help them wherever I could, um, sourcing, evaluation, evaluating, writing deal memos, um, not fundraising, but pretty much all other aspects of it. Um, so that's, that's how I got started with, with Point Nine. Um, the next step, because this was when we actually talked last-

    12. HS

      For sure.

    13. NW

      ... 2015, and so this was wher- the year that we reinvested. Probably I started leading my own deals that year, so it was like three years after I joined. Um, and then in 2016, I was recruited by Insight and moved to New York, which was just after we, we had this conversation. And, um, there, I ended up being for, I guess, 2016 to 2019, investing a little later than Point Nine. Point Nine was early stage seed, and, um, Insight, you know, is probably the biggest venture fund out there, one of them.

    14. HS

      Yeah, uh, with 20 billion, I think, and that's one of them, yeah.

    15. NW

      20 billion, (laughs) yeah, it's pretty wild.

    16. HS

      (laughs)

    17. NW

      Um, and so worked with Insight and was, um, leading Series A's mostly for them, both in enterprise software and then some of the consumer subscription, um, companies that we're going to talk about. And then in 2019, I decided to leave and start Adjacent, which is where I am now at a firm that I founded, and which is an early-stage fund that is investing across both Europe and the US.

    18. HS

      So you've teed me up perfectly there with a couple of different kind of chapters. I want to start first on the institutions themselves, Point Nine and Insight, two of the most respected for different things. What's one takeaway from each that's impacted how you think and take them with you to Adjacent?

    19. NW

      Yeah, um, so there's-

    20. HS

      (laughs)

    21. NW

      There's, there's more than one. I'm gonna try to distill it. Um, the... I think for Point Nine, really the... they opened my, my eyes to the world of venture, right? So it was really... I did... I had no idea that venture e- existed as such, and I think very few people did in 2010 in Germany, right, or in Europe in general. Um, so it was really just understanding that there is an industry that invests in innovation and can make money and, you know, collaborate with the founders in a way that, that is venture capital was not clear to me. And it was really coincidental, as I said, how I actually learned about it. And so I think that whole...... you know, opening of the world, also giving me autonomy of, you know, being involved full stack in all aspects of, of investing and then leading my own deals, um, and also beyond sharing credit for those deals and being LPs in my fund later on and being supportive, I think I just... I wanted... they opened my eyes to venture, to... obviously I learned a lot from, from just being alongside them and seeing how they operated. But also I think as people, um, for me, they were, you know, they put me... somehow they put me in business, right? They, they caugh- taught me and-

    22. HS

      I think also the discipline. And I compare you guys. You both have quite strict discipline. You know exactly what is your type of deal. And I think both of you know what is your type of deal.

    23. NW

      Yeah. I think, and, and, and I, I will draw that parallel again when we talk about my current focus. But I think that what Point Nine was really good about was, um, very early, from Berlin, investing in European founders, agnostically to geo- geography, pretty remote, even, you know, before this whole pandemic. And then also having a pretty specific focus on enterprise software-

    24. HS

      Yeah.

    25. NW

      ... especially the SMB. So Algolia, Typeform, Kristoff, Zendesk. Um, and so a lot of those learnings I transferred. Switch over to Insight?

    26. HS

      Yeah.

    27. NW

      Um, Insight is a very different firm. It's mature. It was... it's, as you said, a $20 billion fund now, but it was actually started as a $20 million fund in '96. But Jeff Horing-

    28. HS

      It was 20 million in '96?

    29. NW

      Yes.

    30. HS

      That was the year I was born. (laughs)

  3. 8:35 – 24:22

    Consumer Subscription Apps

    1. HS

      Uh, and when we look at the consumer subscription market and we look at the winners, we see your Calms at 2 billion, we see your Duolinos at, you know, four to five.

    2. NW

      Six.

    3. HS

      Six now. Okay. It's been trading at four to five, it's now at a high point of six.

    4. NW

      Uh, it's... b- yeah. Okay.

    5. HS

      Okay. Okay. So it's, it's, it's moving around.

    6. NW

      Yes.

    7. HS

      But like, those are like the winners of winners, and they've taken decades. And I actually love consumer subscription-

    8. NW

      Yeah.

    9. HS

      So just let me roll with this one. And I, so I want it to be a great market to invest in.

    10. NW

      Yeah, yeah, yeah.

    11. HS

      But when I just look at the numbers, I just don't know if it is.

    12. NW

      Yeah.

    13. HS

      Can you help me understand-

    14. NW

      Yeah.

    15. HS

      ... is it even a good space to be investing?

    16. NW

      Yeah. Um, so let me, let me, let me start by, by talking about the, the, the, the time of getting these companies to scale, right? So you, you're saying that there's very few data points for good companies, and the ones that we consider good are multi-billion dollar companies, right? So how long do you think it takes for a company to get to maturity? Let's say from founding or seed.

    17. HS

      Well, how do we define maturity? Is that by IPO or is that-

    18. NW

      Yeah, like a, a, let's say IPO level or major acquisition.

    19. HS

      I would say 12 years.

    20. NW

      Yeah, something like that. So the App Store launched subscriptions in 2011.

    21. HS

      Yeah.

    22. NW

      This is 12 years ago.

    23. HS

      Yeah.

    24. NW

      Right? So the first companies that were started around this model-

    25. HS

      Mm-hmm.

    26. NW

      ... like the Calm which was 2012, which is 11 years ago-

    27. HS

      Mm-hmm.

    28. NW

      ... they just get to the level of maturity.

    29. HS

      Yeah.

    30. NW

      Right? So I think back to what I was saying about, um, Point Nine and, and Insight, I, I realized that there's much less benchmarks and companies to point to, but I think they're emerging just now. Right? So I think that the time to get to scale in this model has just been achieved. And if you look at USV, their first fund just wrapped after 18 years, right?

  4. 24:22 – 29:22

    The State of the VC Market Today

    1. NW

    2. HS

      We said before that actually eight kind of sucks as a place to be. Now I have my thoughts around why-

    3. NW

      Yeah.

    4. HS

      ... but as, I don't wanna lead the guest.

    5. NW

      Yeah.

    6. HS

      How do you feel about the right insertion point and where kind of price to value is best?

    7. NW

      So I, I, I, I, it's hard for me to, to really make a qualified statement across all verticals-

    8. HS

      Yeah.

    9. NW

      ... because I, I, I can't ... It really depends, right? There's great As for sure. Um, I think there's also great As in my category. I just, I think that the best for me, that's why I chose, um, seed, is that I believe that seed is the best in terms of upside potential, downside risk, and expected future dilution, especially given that we ... I operate under the assumption that we, I have multi-billion dollar exits, not $10 billion exit, right? That is reflected in both when I come in and then how big my fund is, which is reasonably small-

    10. HS

      Mm-hmm.

    11. NW

      ... and consciously so, because I want the strategy to work. Even if it's a $2 billion exit, it should return the fund once, twice, maybe three times. Depends on when, how, how early I got in. And so I think seed, that's why I chose seed, right? And I think the reason to expand more strongly to A would be that we have more confidence that the outcomes get bigger-

    12. HS

      Mm-hmm.

    13. NW

      ... and we have some, you know, I guess, portfolio that warrants diversification across a number of investments. And so I think that there's a limit to how late you want to raise capital with these companies, right? And so that's also a mismatch that I have with some of the multi-stage funds, right? Because for me, if I invest at seed or A, I do seed and A, right? It's like, I would say, 70, 75% seed, and then the rest is A. So I do it, I, I also do it if, if it makes sense and if it's not a crazy price, right? But oftentimes, I think, "Okay, we invest, we build the company, we get to the significant level, we only raise follow-on funding if we really see those next chapters and those next levels of acceleration." Otherwise, let's not raise too much too early, right? Like, I'm not the one that chases high valuations. I'm actually the one that says, "Let's keep the options open," right?

    14. HS

      You're also not the one deciding. The founders listen to you.

    15. NW

      True. Yeah. No, that's, uh, not, not always, no. (laughs)

    16. HS

      (laughs)

    17. NW

      Which is the founders I like the most, but ... (laughs)

    18. HS

      Well, this is, but this is what's hard. Like you said about the capital efficiency of this business model, and I totally agree with you. The hard thing is that actually founders see, uh, alternative funding-

    19. NW

      Yeah.

    20. HS

      ... rounds for-

    21. NW

      Yeah.

    22. HS

      ... alternative, like, scaling-

    23. NW

      Yeah.

    24. HS

      ... companies.

    25. NW

      Yeah.

    26. HS

      Enterprise SaaS, SaaS.

    27. NW

      Yeah, yeah. Yeah, yeah.

    28. HS

      They go, "We want that."

    29. NW

      Yeah. No, it's, uh, I think, I mean, so I caution not to raise on too high valuations-

    30. HS

      Yeah.

  5. 29:22 – 48:27

    Deep Dive on Adjacent

    1. HS

      the fund model. How big is the fund? How many lines, like, number of companies in the fund? Just walk me through that portfolio construction.

    2. NW

      So the fund is, uh, I, I never announce the funds, and I'm inclined not to do so, but I'll give you all the other things-

    3. HS

      Sure.

    4. NW

      ... um, of the model. And, and, you know, you can work back from that. So the model is that I have somewhere between 20 and 25 companies in a fund. The majority of that is seed. Um, seed for me is a little more flexible than how other people think about it. So I've, um, done very early seed from Opal, right?

    5. HS

      Huh.

    6. NW

      We've done that together. Uh, Kenneth and a prototype. Um, and then I've done late seed, which is, um, company has raised to seed, but I really want to invest, and I find a way to get them to agree. And that means it's a bit of a later seed in terms of the pricing-

    7. HS

      Sure.

    8. NW

      ... but it's not quite yet an A. And so that's where I move, is like there's some flexibility in that. I also don't care about the labels so much. Like, some of the seeds I've done and some of the As that I've done were at the same valuation, you know? Like, so it's just like, I don't ... The, those labels are arbitrary to me. And so I just try to get my ownership on those 20 to 25 companies-

    9. HS

      Mm-hmm.

    10. NW

      ... which is, um, with the current fund I'm investing in, it's 10%.

    11. HS

      Sure.

    12. NW

      For the f- last six months, it's actually been 11% because the macro is starting to come down. Maybe also I'm becoming more bold. I don't know. But, um, it's, it's 10% for, for the average of this fund. The first fund was a little different because I erred on the side of, uh-... proving that I can be in good companies.

    13. HS

      Right.

    14. NW

      So there were some companies where I have less desirable ownership, um, they're great companies. The hit rate, I think is quite high in the first fund. But with fund two, I wanted to prove I can get the double-digit ownership, and I am getting it. On the same side of this, probably still a bit too early to say that the hit rate is the same.

    15. HS

      Sure.

    16. NW

      It's just a bit smaller fund. So it's 20, 25 companies, um, the check size goes between one and seven.

    17. HS

      One and seven?

    18. NW

      Yeah.

    19. HS

      That's a big range.

    20. NW

      Yes. But it's, uh, I think-

    21. HS

      Is that seven across re- rounds or is that in one hit?

    22. NW

      I, I've done ... The biggest check I've written is seven and one.

    23. HS

      Phew. Fuck.

    24. NW

      Yeah. And it's what I would consider-

    25. HS

      Did your decision-making change for that seven versus the one and a halfs?

    26. NW

      Yeah, so the, the, so my position currently is, um, the, the ... I made this graph which, um, is, uh, probably the simplest positioning graph, that if you had a whiteboard here I would just, uh-

    27. HS

      (laughs)

    28. NW

      ... put it on the wall now. But it's, um, I, I, I try to lead at seed, and I try to co-lead at A. And so what that means is that, again, you know, three quarters of the fund are seed, within early and late seed, and then the As that I'm doing, I usually collaborate with other funds on them. And so especially in this market, I started doing this a year ago, but it's ... I, I, I, I think I've, I, I, I like that part of the strategy because my fund is small enough so that I can do it, so that I can get on my ownership target and another fund can get on their ownership target. At the same time, it enables the founder to have more money-

    29. HS

      Okay.

    30. NW

      ... so that they have longer runway, which typically now I plan for three years.

  6. 48:27 – 55:21

    The Rise of Solo GP’s

    1. HS

      but it's like, you know, number one killer of partnerships is actually partnership breakups.

    2. NW

      Yes.

    3. HS

      And you're like, "Well, it's quite hard for me to argue with myself that much."

    4. NW

      Yeah. Yes.

    5. HS

      Um, so I think people forget about that.

    6. NW

      Yeah.

    7. HS

      My question to you is does it scale?

    8. NW

      Yes.

    9. HS

      Three funds down, 20 c- 20 to 25 companies. Fast start-

    10. NW

      Yeah.

    11. HS

      ... deployment cycles. You're at 60 to 70 companies in five years?

    12. NW

      Right. Yeah, so, um, the, the, the, before... I, I wa- want to answer this question just before I think you touched also on something here with, um, being solo and the risks of it, but then also the benefits of it, right?

    13. HS

      Yeah.

    14. NW

      Because, um, I, I think you're absolutely right that partnerships can be one of the biggest reasons for it not working out.

    15. HS

      Sure.

    16. NW

      Especially if it's a forced partnership, right? And so when I decided to, uh...... start a firm, it was not, "I will do it by myself." It was just, "Okay, I want to start a firm. Who do I do it with? There's a small list of people I would like to work with, but one, they're all at Great Firearms. Two, we never really worked that closely together. Maybe it's better to co-invest for a while." So it was like, it was not, "I want to be by myself. I'm going to go do it." It was, "I want to do this and I don't want to rush into anything. So let's do, start this way and then see what happens." And so it was a very organic way of getting there and now I'm quite comfortable with it. I don't even know if it will stay like this forever, to be honest. Right? Like, I'm young. I'm, you know, four years in. Like, maybe in 15 years, the world looks differently, right? Maybe in five, maybe in ten. I don't know. It's just, um, I, I understand things change and maybe this is one of the aspects that change, perhaps. But I think that what it just shows is that there is people, I think, that benefit from being able to fully follow their own thesis. And I will also say that, as a person, I've suffered in the past from very negative feedback on my deals. So I'm, I'm sensitive as a person, I guess. And so if I have a strong opinion on something and that gets mistreated in some way, whether it's, um, aggressive or just passively, um, I think that will change my opinion or at least, um, give me a lot of frustrations in some sense. And so I think that in the early stage where it's a lot about having a pretty unique perspective on something that is not a consensus-driven thing but is really aligned with you believe it and nobody else, I, I mean, sometimes some other people but like-

    17. HS

      Sure.

    18. NW

      ... you know, fewer than actually do believe, I think solo GP is, for the right person, a very good fit for the early stage. And I think most consensus-driven models at the early stage, uh, unless it's a very aware and mindful partnership that really supports each other and, you know, can all see the complexities of human interaction, I think it's maybe beneficial to just have one opinion as long as you're right more than you're wrong.

    19. HS

      How do you deal with decision-making, deal decision-making? It's tough on your own.

    20. NW

      Yeah, I guess you have to find your own w- your own process and I think that there's just different types of people. I think there's some that, that really need to test their conviction with other people.

    21. HS

      Mm-hmm.

    22. NW

      And then there's others, and I think I'm, uh, included in that set, that really challenge themselves all the time, (laughs) but also with their opinion on a deal.

    23. HS

      How do you challenge yourself with your opinion on a deal?

    24. NW

      I try to just, um... Well, so f- first, I have, like this is... First, I have to actually have a hypothesis and m- and have one opinion, right? So this is before I even challenge myself. I think the, the core of how I operate is that I have a bunch of frameworks and, like, ways of looking at the world in technology that I've taken from the 12 years that I've been in investing and refined to make it fit my style, and I apply them every single time. Some of that is very consciously and some of that is probably a, a little, um, subtle and, and, and just instinctively at this point, right? For example, founders is, like, actually interesting. It's like I, I don't think I have a great fa- framework for evaluating founders.

    25. HS

      Huh.

    26. NW

      At the same time, I think I've worked with amazing founders, right? And so I think it's just, um, that is, I think, an more instinctual thing where I just have a, uh, I'm attracted by a certain type of founder and they are attracted by me.

    27. HS

      Who's the best founder that you've worked with?

    28. NW

      (sighs) The best founder.

    29. HS

      I can say mine easy. It's Lior and Akim at Triple Dot Games in London, or Triple Dots Studios. I've never seen execution machines like it.

    30. NW

      Yeah.

  7. 55:21 – 59:56

    How I Use Evolutionary Biology to Invest

    1. NW

      I, I call the firm Adjacent because, um, there's this term in evolutionary biology called the adjacent possible. And what it says is that evolution happens usually as a combination of the existing phenomena and in a relatively deterministic way. So we're somewhere, right, and based on what is available at this point, the combination of the things usually lead to the next step.

    2. HS

      Mm-hmm.

    3. NW

      Right? So, like, Transformers being developed somewhere within Google. Somebody taking that, building that up and creating OpenAI, then that actually becoming consumer subs application that charges 20 bucks a month (laughs) with ChatGPT. Those things altogether create the breakthrough, which if you ask somebody on the street, they're like, "Overnight, AI was created and it's living in this bot." Certainly this was not the case. There were very specific steps that were leading to this outcome that is now perceived as happening overnight. And so my belief is that understanding some of those components and where they could lead to actually can give us some understanding of the companies that can be built in the next 10 years or that really benefit from a trend. And this can be technically, like the example I just brought, but it could also be, um, behaviorally or, um, um, socially, like Calm for meditation. Meditation was not as mainstream as it was when we invested, right? Um, Opal, that's why my thesis with Opal, um, was that screen time management will become... We, we're just learning how to deal with these phones, right? They're always in our hands. We're talking to each other and we're looking at our phones. This is, it's not a healthy behavior, right? And depression is on the rise in the, in the West. This, I, I'm not saying this is only because of this, but I think technology and the way we're using it and the way it's disconnecting us from each other has, has a, has a role, uh, to play in that. And so I, I try to identify these changes and, you know, current, um, macro changes, and then think about which companies could create a category around that. And so I believe that those companies benefit from growth drivers that are much more meaningful than any execution.

    4. HS

      I, I totally get you and agree with you. I, I (laughs) I want to ask on the consumer subs element there.

    5. NW

      Yes. Yep.

    6. HS

      Just getting back to it, but like, I've seen so many consumer subs that are leveraging OpenAI models in particular.

    7. NW

      Right.

    8. HS

      And it's, uh, what all investors say is, "Listen, there's no proprietary data models here. You're a thin layer on top of someone else's model."

    9. NW

      Yeah.

    10. HS

      "Not interesting."

    11. NW

      Yeah.

    12. HS

      "Done."

    13. NW

      Yeah, I, I, I-

    14. HS

      Is that fair? I don't know.

    15. NW

      I, I'm not s- I, I'm not sure. Like th- uh, this is also something I learned from, from Jeff Horning. He talks about software in a way that is, um, coded experience, right? So like most software being workflow solutions, or actually under- an understanding of how you can make processes better in a specific industry or in a specific workflow, and then encoding that in something that automates a lot of that. And now the automation of this is coming to the next level, right, with AI.

    16. HS

      Yeah.

    17. NW

      And, and this will happen both in enterprise application, but also in, in consumer applications. And so I think that a lot of the, the value that has been built in software over the last 20 years has actua- actually been in the application layer that takes these breakthroughs and just verticalizes them for a specific use case or a specific customer demographic and monetizes them. So the way I look at AI, and I'm, you know, I, I actually have a lot of like, I think it's super interesting what it means for consciousness and because we know, we know nothing about what, like, consciousness actually is, right? And so there's no telling what could lead to a consciousness emerging because we don't understand what it causes in a human, right? So there's like, there's a lot of very philosophically very interesting, I think, things happening there beyond the wow of what the technology enables today. Um, but I, the way I think about it from a, uh, an, an Adjacent perspective is we're gonna have, um, companies that are already consumer subscription companies that are implementing this to make their products-

    18. HS

      Right.

    19. NW

      ... even more sticky, more functional, and give features that were not possible before.

    20. HS

      I totally get you. So it's existing players who already have existing data models, uh, and proprietary data sets-

    21. NW

      Big user base.

    22. HS

      ... that can then leverage them. Yeah.

    23. NW

      Yeah. I, that's how I look at it, but it's certainly, I'm also just trying to find the angle that kind of fits my thesis, right?

    24. HS

      (laughs)

    25. NW

      So that's how I have to operate.

    26. HS

      Of course.

  8. 59:56 – 1:10:29

    VC Market Predictions

    1. HS

      Komass, when we project out to the next, like, 10 years of venture, what do you think the market looks like then? Like, like, it's changed so... I think this has been the most, you know, defining five years of venture of the last 50 years of venture, actually, when you look at the different models and innovations that have arisen. When you think about the next 10 years of venture, what do you think the venture model and world looks like?

    2. NW

      So I, I, uh, uh, on a, on a high level, I don't have any doubt that there will be innovation. If anything, it will probably keep on accelerating because of, you know, more adjacent possibilities. Um, so I think that there will be venture. I think there will be innovation. And I think the model will persist. Um, as how the industry is structured, I don't have a crystal ball. From what I'm seeing today, I think the next few years will be pretty difficult for most firms. I think the big ones have become too big, and I think a lot of-

    3. HS

      What happens to them?

    4. NW

      It depends on the firm. Uh, it's certainly hard to make a blanket statement. But I think that fund sizes will go down.

    5. HS

      Mm-hmm.

    6. NW

      I think people will leave because if you have carry in a $3 billion venture fund-... y- th- is that worth a lot today?

    7. HS

      I don't think that realization's hit, by the way.

    8. NW

      No.

    9. HS

      Listen, I'm super candid. It's one of the reasons the show's been successful is I kind of forget that cameras are turned on-

    10. NW

      (laughs)

    11. HS

      ... and so I just speak freely. But, uh, you know, I'm actively trying to hire partners, investors, anyone talented who can invest. (laughs)

    12. NW

      Yeah.

    13. HS

      Um, they still buy that their carry at the $2 billion fund is worth 30 million on a 3X fund.

    14. NW

      Yeah.

    15. HS

      I'm like, "Trust me, you ain't shooting 3X on that $2 billion fund."

    16. NW

      Yeah, yeah. I agree with you, um, and I think LPs agree with us. Uh, at least, I mean-

    17. HS

      LPs for sure agree with us. (laughs)

    18. NW

      Yeah, and so but, but that means, right, like, it will ... it's a question of time whe- uh, from, from a LP perspective to put pressure on these funds, that they need to see data that those type of vehicles can create the same type of outcomes. And maybe they could in the last 12 years that we were i- in venture, right, or I was, and I, uh, admittedly also, like, it, it was a whole bull market run, right? So I, I see that and I'm actually, you know, cautiously excited about this period, which is (laughs) maybe a weird w- thing to say. But I think it's ... this is like earning your stripes also, right?

    19. HS

      Correct.

    20. NW

      It's like how do you actually navigate this scenario? And I think as small funds investing early, we have a benefit there, because I do believe that it's still the best place to be. The risk is the highest, but the, the, the opportunity on the upside as well.

    21. HS

      I, I don't think seed is a great place to be right now, man.

    22. NW

      Yeah.

    23. HS

      And I am a seed investor with you, but I'm saying this because, you know, bluntly, I think A and B, A, B, and C, no one wants to deploy big dollars.

    24. NW

      Yes.

    25. HS

      All the multi-stage funds just don't wanna put cash out the door, but they all wanna be in market, so they're all moving earlier and earlier to seed. They're telling their principals and associates, "Hey, go write some seed checks-"

    26. NW

      Yeah.

    27. HS

      "... while we deal with this m- morass of shit on the board of all these companies."

    28. NW

      Right.

    29. HS

      Um, bugger.

    30. NW

      Yeah, I th- (laughs)

  9. 1:10:29 – 1:16:46

    Life Advice from Nico

    1. HS

      for venture.

    2. NW

      I think it's not about what you look like, it's about like what you do, and if you do that then you go your own way in some respect. And I think that is something, by the way, that I think founders respect, right?

    3. HS

      Yeah, really.

    4. NW

      Because you're not an associate or a principal, even a partner that was hired into a firm at- with a cushy salary, but you took a risk, you built something, and you're trying to, you know, be m- be also empathetic towards the founders that are doing the same thing. So I think that's one of the- the big strengths of our model. Why is it? I don't know. I think, I mean, for me, I- I al- I think I was pretty ... my, I grew up with my mom, and so I think I didn't have a father figure around. I did go on- on, you know, in, when I, when, on vacations and I saw him. He was involved, he was not like an absent, absent father, but he lived many hours away and in the end I think that made me just find my own path more and be comfortable with my own worldview and decision-making. And I didn't have so many o- other role models either, I would say. And so I think that-

    5. HS

      When you look back now, do you- do you wish you had?

    6. NW

      I, did I ... would- would I h- uh, let's say it this way. I now have one kid, I'm expecting a second, and it's very important to me to be a good father to the family and- and both a husband and- and a father to my kids, because I do think it really, um, I think it really did hurt when-

    7. HS

      Mm.

    8. NW

      ... I think when your dad leaves at a young age, it just leaves a mark.

    9. HS

      Yeah.

    10. NW

      And I think that's part of where my drive comes from. I don't think it's all of it, right? I think there's- there's genetics and- um, just, you know, serendipity and how things play out and so on. But I- I certain- I also, we grew up with very little money, right? My mom had three kids from different fathers by herself. Um, and when I grew up, that was also, there were limitations, right? And so you, I think I just tried to, those things like, I tried to just have, um, agency and, um, independence. Well, I'm, I don't want to make it sound like I had like ... I- I had everything that I needed.

    11. HS

      Hmm.

    12. NW

      I never was hungry. I had my mom, I know loved me, and you know, I think that there's much worse upbringings, so I don't wanna, um, go there. But I just think that finding- (laughs)

    13. HS

      Nico trekked across the desert with nothing but a sherbet lemon.

    14. NW

      (laughs) Yeah. That's how I started. No. Oh, certainly not. And in Germany, right? Like, so this is also like, what- what are we complaining about? I'm a white man that grew up in the Western world, right? So there's very little things. But still, do I have some trauma from how I grew up and my circumstances? Yeah, and it formed me, and that's, everybody has those, right?

    15. HS

      Sure.

    16. NW

      And so I think, I don't think, for me, money is any ultimate ...... goal. I need money to be independent and have the freedom to do the work that I want, to-

    17. HS

      Do children make you more hungry for money? That's something that we (laughs) spoke about on Message.

    18. NW

      Yeah.

    19. HS

      But like-

    20. NW

      I-

    21. HS

      ... kids change a lot.

    22. NW

      I think, I mean, what changed, uh, actually I think, I mean, and I'm still a young dad, right? My, my daughter's turns three this month.

    23. HS

      Uh-huh.

    24. NW

      And, um, my son will be born in one and a half months, so also still learning there. But, uh, I think it didn't make me m- I, I actually am quite concerned about people that grew up, grow up with too much money. I think that it can be very harmful-

    25. HS

      Yeah.

    26. NW

      ... for kids to be too pampered. And so I want to provide security for my family and I really enjoy being able to take my wife, we went to Japan recently as a babymoon before our next baby and like went to nice hotels. And that's, I feel very grateful that I'm able to do that and I really appreciate it. It's not that, I really don't take that for granted at all. So I l- I'm proud that I achieved that. Um, at the same time, I don't have a number in mind. I don't think that more money will make me any happier. I don't think I need more money to make my kids happier. You know? Like it's really not what's driving me today. And I think what changed with the kids is more understanding that, I think it makes you think even more long term in some ways because you want the world to look good for your kids. And so you think about things that might happen beyond your, like next, you know, lifespan, whatever it is.

    27. HS

      Yeah.

    28. NW

      But I think that also, for me, I think that had a positive impact on where I want to focus my investments, right? And like, do I want to be in a company that I wouldn't feel good about telling my daughter about?

    29. HS

      It's a good question.

    30. NW

      Yeah.

Episode duration: 1:29:33

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