DEBATE: State of Seed Investing w/ Jason Lemkin, Sam Lessin, Frank Rotman & Harry Stebbings | E1047

No one gives a shit about a c- company that does $200 million top line and grows at 30% margins. Right? No one cares. It's like, you wanna bet on AI? Bet on Facebook, bet on Amazon, bet on Microsoft. It's so obvious.

(instrumental music) I am so excited for this. I've been really (laughs) looking forward to this one. I'm so used to having a one-on-one, now I get three brilliant brains joining my terrible British accent. And I'm just gonna dive straight in. We're doing the state of the seed market today. Sam, I'm quoting you, "Seed investors need to come to terms with the fact that this is not an 18-month timeout, it's likely much longer, and even the death of systematic thematic seed funds." Can you help me understand, Sam? What did you mean by this?

I think I said it. (laughs) No, I mean, like look, I think, (laughs) I think, um ... Look, I've, I've seen a lot of eras of seed investing in my life and career so far. Actually, hilariously, I was just reminded of this by someone. You know, my father, as he used to say, was an incredibly, uh, active seed investor in the late '90s in th- in, in the East Coast. He used to call himself, he say, "I was the big ..." He used to say, "I'm the largest seed investor in the East Coast, which is kinda like being the smartest utilities executive." Right? And so I, you know, but he, you know, I used to sit in on a ton of meetings when I was a kid in the late '90s and kind of watch the rise and the 2001 crash. Did a bunch of angel investing myself through the next decade. You know, ended up starting a seed fund with some friends, you know, in the last decade or so. So I've seen a few eras of this, and I think what was unique about the last era of seed funds, which really was the first time it got big and institutional, right, um, was this era where really the role of a seed fund was to kind of be the first step in a factory production line of startups that you popped out the backend $1 to $10 billion valuation companies pretty predictably, right? And, you know, i- it was a factory system. You found a company, you packaged it up, you knew what the series A firms were looking for, you knew the series A firms, you say, "Okay, we're gonna hit these two metrics, we're gonna pass you to the next line of production." Next line of production does their things, passes them to the Bs, pass them to the Cs, eventually pass them to Goldman Sachs, pop them out, $10 billion company, everyone makes money. That's over, right, because I think that was predicated ... It wasn't just zero interest rate policy, there was a bunch of things that was predicated on, but it was predicated on this idea that because of technology and things like AWS and platforms, that you could very predictably manufacture good companies, right? Not great companies. You weren't trying to manufacture a Facebook. Every once in a while you get lucky, right? But you could manufacture predictably the DTC companies, the companies on theme, you knew what people wanted, you passed it through the line. That's over, right, because it turned out that didn't work, right? Like everyone got excited about these companies and all these companies got crushed once they went public, right? They, they're not good companies, the market doesn't want, you know. And we, we were in plenty of them, right, along with everyone else. My view when I say that seed is dead is that I think the factory model of seed which supported massive scaling of it is dead. And we're kind of back to where we have been historically, which is spe- seed is a bespoke industry, it's a bespoke thing. Some people can do it well, it's about being better at pattern recognition. There's certain things you can get right about it, and it will be a power law game where you'll still have a few huge victories and a lot of losses, but, you know, the idea you can sit there and just manufacture pretty good outcomes from seed, I think, is over and not coming back.