The Twenty Minute VC

Nikhil Basu Trivedi: Why 99% of AI Investments Will Go Bust | E1057

Nikhil Basu Trivedi is Co-Founder & General Partner at Footwork, an early-stage focused venture firm investing its first fund. In his venture career, he has invested in the early rounds of several companies that have exited or are currently valued at over $1B, including Athelas, Canva, ClassDojo, Color Health, Frame.io, Imperfect Foods, Lattice, and The Farmer's Dog. Prior to Footwork, Nikhil was a Managing Director at Shasta Ventures, on the investment team at Insight Partners, and on the founding team at Artsy. --------------------------------------------------------- Timestamps: (0:00) Intro (20:45) What is Footwork VCs Strategy? (37:05) Section on LPs (46:02) Strengths and Weaknesses in VC Funds / Anaylzing Self and firm as VC (49:11) Biggest Wins and Losses (57:22) Quick Fire Round --------------------------------------------------------- In Today's Episode with Nikhil Basu Trivedi We Discuss: 1. From Summer Intern to Founding a Firm: The 13 Year Journey: How did Nikhil first make his way into venture as an intern at Insight Partners in NYC? What does Nikhil know now that he wishes he had known on his first day in venture? Why does Nikhil advise all young VCs to "not look at their business card"? Why does title not matter in venture? Should founders meet with Juniors as well as GPs and more senior people? 2. Small Funds Outperform Large Funds: Why does Nikhil believe that small funds outperform large funds? Why is AUM the biggest bullshit metric in VC? How does Nikhil advise seed stage founders who have offers from seed firms for smaller rounds at lower valuations and are weighing them against larger rounds with higher valuations from multi-stage funds? Does Nikhil believe that platform value-added services really provide any value? 3. The Art of Investing: What has been Nikhil's biggest investing win? How has it changed his approach to investing? How does Nikhil prioritize between people, traction, and market? What is most important? What has been Nikhil's biggest investing miss? How has that changed his approach? Does Nikhil believe the great founders are immediately obvious? Why is market size the single question that keeps Nikhil up the most? 4. The Dysfunctions of Venture Capital: What are the single biggest areas of misalignment between GP and LP? What do many GPs see and know well that LPs should know and see more of? What are the biggest ways that decision-making breaks down in a venture fund? Why does Nikhil believe that so much of the investment in AI is going to go up in flames? --------------------------------------------------------- Subscribe on Spotify: https://open.spotify.com/show/3j2KMcZ... Subscribe on Apple Podcasts: https://podcasts.apple.com/us/podcast... Follow Harry Stebbings on Twitter: https://twitter.com/HarryStebbings Follow Nikhil Basu Trivedi on Twitter: https://twitter.com/nbt Follow 20VC on Instagram: https://www.instagram.com/20vc_reels Follow 20VC on TikTok: https://www.tiktok.com/@20vc_tok Visit our Website: https://www.20vc.com Subscribe to our Newsletter: https://www.thetwentyminutevc.com/con... --------------------------------------------------------- #NikhilBasuTrivedi #Footwork #HarryStebbings

Nikhil Basu TrivediguestHarry Stebbingshost

Sep 5, 20231h 8mWatch on YouTube ↗

WHAT IT’S REALLY ABOUT

Why Small Funds Win, Product-Market Fit Rules, And AI Falters

Harry Stebbings interviews Footwork VC co-founder Nikhil Basu Trivedi on how his investing philosophy has evolved, why small early-stage funds outperform, and why most current AI seed bets are likely to fail. Nikhil emphasizes focusing on behaving like a full venture capitalist regardless of title, and maintaining the mantra that “exceptional companies deserve exceptions” when they break the usual investment rules. He explains why he weights early signs of product‑market fit above team and market, and how that led to outlier wins like Canva and The Farmer’s Dog while missing pre‑product giants like Figma. The conversation also covers LP selection, partnership dynamics, platform value-add myths, reserves discipline, and how becoming a parent has changed his time allocation and investment bar.

IDEAS WORTH REMEMBERING

5 ideas

Act like a VC from day one, regardless of your title.

Nikhil’s early advice—“don’t look at the title on your business card”—freed him to source, decide, help, and exit like a full partner, which he now tells all junior investors; founders should judge associates by quality of thought, not job title.

Exceptional companies often break your models—make room for exceptions.

Canva violated many conventional rules (location, team profile, no revenue, non-elite cap table) but had clear product‑market fit signals; Nikhil argues rigid adherence to models causes you to miss true outliers.

Small, focused funds are structurally better positioned to outperform.

He believes consistently 5–6x‑ing a $1B+ fund is nearly impossible mathematically, while incentives push GPs to maximize AUM; Footwork deliberately runs a $175M early-stage fund to maximize multiples rather than fee income.

Weight early signs of product‑market fit above team and market theory.

Contrary to many investors who start with market or team, Nikhil prioritizes retention, organic growth, and intensity of use—even on small bases—then evaluates founders and only lastly wrestles with market size, which he finds often underestimated anyway.

Most current AI seed and foundation model bets are mispriced and misaligned.

He sees multi-stage funds pouring huge checks into AI seeds and foundational models where money largely fuels GPU capex, competition is extreme, end-user use cases are unstable, and many app-layer businesses will be subsumed by improving base models like GPT-4.

WORDS WORTH SAVING

5 quotes

Exceptional companies deserve exceptions.

— Nikhil Basu Trivedi

The runway doesn’t matter unless it leads to a takeoff or a landing—ideally a takeoff.

— Nikhil Basu Trivedi

Small funds outperform bigger funds. It is incredibly difficult to have a 5x net return on a billion‑dollar plus fund.

— Nikhil Basu Trivedi

There’s a huge difference between the ability to fundraise and the ability to build a business.

— Nikhil Basu Trivedi

AUM is the stupidest thing to talk about as a venture firm… it’s a complete vanity metric.

— Nikhil Basu Trivedi

Early-career advice and the mindset of a true venture capitalist“Exceptional companies deserve exceptions” and the Canva case studySmall vs. large funds, AUM vanity, and return alignment with LPsHow to evaluate early-stage startups: traction vs. team vs. marketThe AI hype cycle and why most AI seed investments may bustPartnership decision-making, reserves, and platform ‘value-add’ skepticismLP selection, GP–LP misalignments, and building Footwork’s long-term strategy

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