The Full Ratchet: 266. Velocity as a Superpower, Why Contrarians Win, The Role of a Board Member, and Why Some Challenge When they Should Chill (Ed Sim)
Ed Sim of boldstart ventures joins Nick to discuss Maintaining a Disciplined Fund Size and Strategy, The Rise of NYC Tech, and Changes in the Exit Environment. In this episode, we cover:
- Walk us through your background and path to VC
- What’s the thesis at boldstart ventures?
- What was it like starting Boldstart in NYC in 2010?
- Tell us a bit about the thesis at investment and how things evolved over the years until the ultimate exit?
- What’s your preference… Niche and narrow problems or big and expansive opportunities?
- What is your mental model for investing in enterprise founders with ideas?
- category creation
- Why only technical founders?
- Will this enterprise bull market sustain?
- You’ve talked about being involved and sitting on boards from “whiteboard to scale” ?… how do you manage ever-increasing board responsibilities with other demands of the job?
- Where are VCs most lacking when it comes to the value that early-stage founders require?
- Do you think there’s too much money in venture?
- How do you win in a seed with so many seed funds?
- In the early days, when you try to build a community, it’s a long-term investment. And it’s like a faucet dripping, drip, drip, drip, drip. And then by year three, if you do it, right, and your patient, just say the dam explodes. And I think that’s the same way for venture funds..
- We call it founder market fit first and foremost, right. And so we love companies that are born out of a founders pain, where the founder, it has been solving a problem for a long time, waking up in the middle of the night or in the shower, you know, kind of thinking about it right? That that obsessive mission driven founder is something that we get excited about. And what comes hand in hand with that usually is this is that they’re so focused on the problem. They’re focused on who the user is. And you have to have that narrow, obsessed, niche focus perspective of what does the user experience every day? How do I make them a hero? How do I make their lives 10 times or 100 times better, because if you focus on the one, and then the 10, and the 100, then the 1000. That’s how you build an amazing business.
- Our equivalent is like, you need to give them a flying car and make it feel like a faster horse. So there’s that steady balance between, you have to nail it first, before you move to the next thing. And the definition of how you nail it, I think is up to each company, on how you nail it.
- Ed’s mental model for investing in early stage startups — the 5 P’s : Problem, Product Obession, Passion, Possibility, People
- My first question you need to think about is, rather than say, you know, why can’t someone do something, you need to ask if someone were going to do it? Who would be that person? How would they do it? And how big could it be?
- Technical founders can iterate fast. Paul Graham talks about product velocity as being an early indicator of success. I added kind of my own corollary to that product velocity plus hiring velocity.
- I think that the thing that boldstart does really well, is we help technical founders transition to becoming great CEOs. Just because you’re a founder doesn’t mean you’re a good CEO… it takes a village to grow a startup.
- We’re just in the second inning of digital transformation, right in the sense of, we’re entering a whole new era. I’m bullish on the future of enterprise software, particularly in early stage. There’s just going to be tremendous, tremendous opportunity.
- Ed’s three C’s of helping founders out: Know when to cheer, challenge, and chill.
- VCs on boards are like, margaritas. One is not enough. Three is too many, two is just right. VCs should never claim credit for a company’s success. But they can certainly claim credit for a company’s failure.
- Specialize and invest with courage and conviction.