138: Eric Tarczynski - Contrary Capital

138: Eric Tarczynski - Contrary Capital

In this episode we discuss: When to throw in the towel and when not to, the commonalities between the best and worst founders, the bottleneck to innovation in tech, dealing with pressure to grow bigger funds, venture as an access game and a whole lot more. 


William Jarvis 0:05

Hey folks, welcome to narratives. narratives is a podcast exploring the ways in which the world is better than in the past, the ways that is worse in the past towards a better, more definite vision of the future. I'm your host, William Jarvis. And I want to thank you for taking the time out of your day to listen to this episode. I hope you enjoy it. You can find show notes, transcripts and videos at narratives

Will Jarvis 0:39

Well, Eric, how are you doing this afternoon?

William Jarvis 0:42

Doing great. Well, how are you doing? Well, doing? Well,

Will Jarvis 0:45

thanks so much for taking the time to come on the show. Do you mind giving us a brief bio and some of the big ideas you're interested in?

eric 0:52

Yeah, absolutely. So, so quick background on me, basically. So grew up in New Jersey kind of grew up there, I spent my whole life there, I went to school in Boston, really gonna found my interest in in kind of tech and venture more broadly, while I was there. So started a payments company in in school. And then a few years after that moved out here to SF, so was an early employee at a at a startup that got bought by Lyft. But you know, kind of knew that I wanted to build another company, and it kept coming back to this idea that hadn't been in the back of my mind for several years, I think this idea, really, that the next generation of venture was going to be focused, you know, not on the company, but on the person. And, you know, I'd spent a lot of time, you know, kind of meeting a bunch of really talented friends and peers and things like that. And I think the interesting thing for me was that, you know, these are people that everybody kind of knew we're going to go on and do great things, right, you know, there's their success wasn't necessarily a surprise, right. But but it kind of always, always really interesting to me was like, when you took a step back, you know, in the earliest days, nobody was actually doing anything in a systematic way to kind of identify and and kind of capture that that talent specifically, right. And so we started thinking about, Okay, well feel like there's this huge opportunity to kind of build one of the best venture firms of our generation focused on just that right, focused on really kind of, how do you identify the person before the idea in many ways, right. And it kind of felt like, you know, if we could do that better than most, you know, you could build something really unique, really special, and something really lasting? And so that's kind of what we said the past, you know, five or so years now, in a building at contrary, which is this, you're going to venture firm built like a tech startup backed by many of the world's best entrepreneurs, where if all we're doing is kind of systematically identifying and investing in some of the world's top talent, and so I'll pause there, but hopefully, we can have a good, good high level for you. Yeah, I

Will Jarvis 2:49

love that. And I love the concept of, you know, finding talented people, maybe before they've had that idea, or they've come across that $20 bill on the sidewalk that they can take advantage of, I think you'd Caskey has this great line, you know, everybody gets maybe two or three of these $20 bills on the sidewalk that are really big that you can like pick up and but they're not. It's not like they're all around, you know, the markets are fairly efficient. But oftentimes there are there are things we can find where their market inefficiencies that people can take advantage of. So picking talented people beforehand. Sounds like a like a really good way to do battle people early. When did you first have this idea? And you know, how sure, were you that it was going to work when he first got started? Either? Did you have to be like the tried, I love to ask like people that founded things before, you know how sure, were you before you kicked off? Yeah, if you had to assign like a probability score to it, where would you put it?

eric 3:44

Yeah, for sure. So I had the idea for it when I was in college, actually. And I had the idea, because I was just really consistently finding myself around a lot of people that I thought were super talented. Right. And I think to me, you know, whether naivete or whatever, like I, I was pretty confident that these are super smart people that we're going to go out and do great things, right. And so, you know, that was where I actually hatched the original idea for, you know, for for country but didn't work on at the time, right? It was, you know, working on another startup and, you know, kind of life happened and, and he kind of, you know, didn't didn't really swing back around to it for three or four years. You know, but but kind of over time kept kind of being in the back of my mind kept thinking about it and kind of just continually was excited and energized by it. And so swung back three, four years later, still didn't really think that anybody was doing something like this thought that this was would exist and kind of jumped in. So that's kind of when I first kind of incepted the the idea, I think, in terms of the probability of success. It's hard to tell right? I you know, I never remember saying to myself look like, you know, there's a 1,000,000% chance that this thing is going to work. Right. I, the way I framed it was in the way I think about kind of starting companies in general. Like, it's, it's a, you're making a series of bets along the way. Right? And so the way I thought about it was look like, you know, here's an idea that I have a reasonable amount of conviction in. And, and, you know, I think it's a good idea, right? I think something like this will exist, I think it will probably work. But I can't say with certainty, right. And so what I'm going to do is I'm going to take the next in my case, I kind of box it as like two years, I said, it's like next two years of my life. And I'll, you know, really kind of work super hard on it. And I'll kind of throw myself at IT spend every waking moment of kind of my life at it. And, you know, and we'll see what happens, right? And if after two years, it looks like it's working and kind of progressing and doing well, like, fantastic, like, I'll keep on doing it, right? If not, though, right? And maybe it doesn't look like then then I'll kind of move on and do something else. So that's kind of how I thought about it. I think that a lot of people actually shortchange themselves. I think a lot of people don't spend enough time working on an idea before they decide to kind of throw in the towel. And I think a lot of companies aren't ultimately kind of created as a result of that. And whereas with with country, like I think two years is roughly kind of the right period of time, if you're, if you're wondering, kind of like is this going to work? So?

Will Jarvis 6:27

That's really great. That's really great. I like that framing. Do you think? I guess it's like, super case by case? Right? But how do you think about advising founders on, on how they should time like, like, when is it right? To throw in the towel? And when is it right to push through? Right? Because we can imagine that there's times where you really should keep pushing, you can definitely give up too early, we can definitely give up like too late as well. How do you think about balancing that? And like advising founders when they're thinking through those kinds of challenges? Yeah,

eric 6:57

I mean, there's no, there's no kind of formula here. But after now, having, you know, been a lot gone through this and yeah, kind of, you know, with dozens of founders over the past, you know, five to 10 years. The answer the unhelpful answer is that, you know, right. Like, you know, you know, and it's different for every company, right? I mean, maybe there's co founder conflict, maybe, you know, they literally can't raise capital downstream, maybe it's just kind of plodding along, right. And it's been years at this point, and there's just, there's just kind of no light at the end of the tunnel, right? It's not growing quickly, you're not able to attract right now. It's just kind of like a zombie, right? So it varies by startup, right? But it is one of the kinds of things where, like, you do absolutely no, right? Like, you kind of feel it in your bones, right? You're like look like this, this, like, it's run its course, right? I've kind of given it my all right, I've kind of done everything I could, for whatever reason, like it just, it's just not worth me spending an incremental, you know, kind of year or two of my life working on this. And then you have a hard conversation with your investors and teammates and go from there. And I think at the end of the day, like, for us as kind of VCs, right, like, the the expectation is that, you know, for a seed stage portfolio, or an early stage portfolio, you know, half of these companies are gonna go to zero, right? It's part of the fund math, right. So we expect it to happen. Obviously, it's a hard conversation, but it's it's not a I think sometimes founders get nervous to have that, and understandably so. Right. Like, they get nervous to have that conversation with their investor. Right? And, and, look, I think more often than not, like, we feel the same way that they do, right, and we say, look like, you know, we gave it a shot, we gave it a good run, and like, you know, if you choose to start another company, I'd love to be your first investor. Right? And that's often how it plays out, too. So

Will Jarvis 9:04

good deal. Good deal. So it's very much. Yes, you just need to be smart about things need to be self reflective, and see where you're at. And, you know, don't beat your against your head against the wall unnecessarily. If you've reached a point where, you know, you look inside, you're like, Okay, maybe it's time to go and pivot and do something else. That makes sense. That makes sense. I'm curious, getting back to some of the original things you mentioned, how do you think about evaluating talent? Is it something that is kind of intuitive to you? And that you see somebody like, wow, this person, really impressive? Is there a set of characteristics you look for? Is it a very case by case thing where each each person is individually talented in different ways? And you kind of like it's like an art to it? Or is there kind of a science to evaluating talent that you found over the years looking at so many talented young people working on?

eric 9:54

Yeah, I think the answer is both. You know, I think it's, it's Are there elements of it that you can be particularly scientific about? Right? You know, you can look at a lot of different heuristics. But at the end of the day, you just need to have a good old fashioned conversation with someone oftentimes, right and, and you know, new amount of credential or where they worked, or whatever will will kind of help you understand, like, Hey, what are my goals and ambitions? Right, what I want to do, do I want to build a company do I do I want to know, like, what's the, like, what are my motivating factors here? And, and, and, you know, I think there's no way that, you know, a link somebody's LinkedIn, or something that you could find online will tell you that right. Like, it's just, it's just not the reality. So yeah, all that all that is to say, like, you can do pieces of it scientifically. But at the end of the day, like, you just need to talk to people. And that's like, the, I won't even call it a Saturday, I think it's a great reality. Right? It means that it'll be really hard for the foreseeable future to abstract away, you know, human beings from from early stage venture. So,

Will Jarvis 11:10

good, good deal. If you don't, you're not worried about the large language models coming for you quite yet.

eric 11:15

Not yet. Maybe at the growth stage. But yeah.

Will Jarvis 11:19

Fair enough. Fair enough. When you're having a conversation with someone, and you have that aha moment, that they're really talented, is there anything? Yeah, yeah. Are there any commonalities there you found?

eric 11:38

Um, I don't. I don't necessarily think so. Other than just like absolute hunger, right. Um, like, I think the best people have such exceptional tenacity and clarity of thought, again, it's a kind of, you know, it when you see it type of thing. Whereas, you know, your typical, your typical kind of individual or person that you talk to, just doesn't have that sense of purpose, almost, you know, kind of like, you know, me against the world kind of thing. And, and I think that like that plus clarity of thought are probably kind of the two most important commonalities that you see. You know, I think there's a huge difference between a great founder and and, you know, like, an extraordinary founder, right. Like, you know, there, there are people that we've talked to you that are probably, you know, top five of, you know, the top five people that we've talked to, since starting contrary, five or six years ago, right. And like, those are the people that you want to be investing in, but you maybe find those people once or twice a year, right? You talk to 1000s of people, you come across one or two a year and two, you know, it's, it's hard. But when you come across those kinds of people, you just kind of regardless of what they're doing, you just have to like backup, the bucket loader, and, and the results tend to be pretty special. So

Will Jarvis 13:13

that's great. It does seem to me that venture is kind of this crazy search problem. At somewhere. We mentioned the intellect, there's kind of a handful of people you want to bag, it's very powerful, all based on the returns seem to be very parallel based. Have you think about about going out and finding people? Is it just trying to get as much exposure to different people, college campuses, wherever you can find them to expand the search net wider? Are there any things things, you know, any special things you've done at contrary to kind of source these people?

eric 13:42

Yeah, well, I think traditional venture firms and that traditional, I mean, basically all venture firms, they just sort through networks at the end of the day, right? So they sourced through their personal network, they sourced through, you know, a founder referral, they, you know, if they have a good brand, people go inbound to them. Right. It's it's just like, it's, it's very traditional in that regard. Right. And I think to be clear, like, that works, right. So so, you know, I think I don't think there's anything necessarily wrong with it. But I think if you if you kind of believe that venture is continually evolving and changing and, and that, you know, venture kind of today will not be kind of venture a decade from now. And then you think you have to ask yourself, like, what gets what changes? Right? And I think for us, it's that venture is kind of on this, like, inexorable kind of, you know, creep and march kind of earlier and earlier and earlier, right. And where, what has historically been an industry very focused on the deal and the transaction will be one that becomes more and more and more about the person right? it. And so if you believe that to be true, then you have to go earlier. Right? Then you have to actually be identifying and building deep, authentic relationships with people before they even start a company, right? Because if they've started a company, it's too late already. Right? And I think that's our view is that venture is just going to become more and more competitive. And so if you're trying to kind of, you know, play the game in 2020, or 2022, and 2030, like, you're just going to lose, it's as simple as that. And so I think like, while not a bad game to play today, I think it's very clear to us that in kind of five or 10 years like this, this will not be, it'd be totally different game. So

Will Jarvis 15:44

it's not gonna be the way things have been done in the past. I definitely agree with that. I'm curious. I've always had this question where the bottleneck of innovation is in the economy at this point, it seems to me like when we, you know, put more money in the venture market, they just, you know, push the valuations up, which seems indicative to me that like, maybe we're bottlenecked on like, talent or something like that. I'm curious, what are your thoughts there? Where is the bottleneck at this point? Is it talented founders? Is it, you know, talented builders? Is it money? And just money's not allocated properly? Or is there something else going on?

eric 16:21

Yeah, I mean, I think I think what's happened in the venture market over the past couple years was simply I mean, it was it was it's, you could have a you have an entire podcast about that. But I think like, you know, high level read, it's, it was a combination of like, macro policy plus COVID. Right. And so, you know, tac was, was a massive beneficiary of those when ended up being tailwinds. Right. Obviously, that's corrected, right. And people were talking about, wow, like, you know, this has moved tech forward 510 years in the adoption curve, right. Like, it's only the beginning, like, you know, a lot, a lot of very HYPEE things and, and, you know, people were funding companies like, you know, hop in or whatever, at these, like, kind of, you know, kind of, you know, egregious valuations thinking that, you know, the moment that kind of COVID died off or kind of receded, you know, that that kind of, it would continue to persist. And I think it's very clear that that was not ever going to be the case for us at least, right. And so, you know, you're now seeing kind of a bit of a reversion to reality. And that's great, right? And I think look like, you know, you ask yourself the question of, like, you know, kind of what is tech look like in a decade from now. And I think I think the reality is like tech continues to, to kind of, you know, eat and dominate, you know, kind of the world and be one of the best growth categories over the next decade. Like that's not changing, like, structurally, tech is not going anywhere, right? It's still a very small percentage of GDP, all things considered. And so, like, we're absolutely kind of, you know, bulls on on tech, things like this. And what's been going on over the past few months, I think are just healthy reminders and recalibrations to people that, you know, hot money and easy money is not often kind of, you know, easy to come by. So

Will Jarvis 18:11

definitely, definitely up. This does remind me we, we had another guest on the podcast, Paul smelting. He's an economist at Yale, wrote this paper, it's very hawkish, but it describes how there has been this 800 year decline in long term interest rates. You know, it's noisy, right. So, you know, we're kind of going back up right now. But do you think this like long term trend towards lower interest rates, will over time just make venture increasingly competitive? Or are we not doomed to that kind of fate? As people get pushed?

eric 18:43

Yeah, yeah, that's a good question. Um, you know, I I think that venture is simply going through kind of the exact same adoption curve as other asset classes have, right. So I think my view on on venture is very similar to what happened in, you know, p in the 80s, hedge funds in the 90s. Right, like, where you kind of have this relatively sleepy industry for the first 30 or so years of its existence, right? And then, all of a sudden, you can't I mean, you're just writing this literally like 50 to 100 year secular kind of slow trend, right? And then at a certain point, it kind of finally starts to accelerate. And it goes from being a cottage industry, right? If you if you remember, like, you know, I mean, as recently as 10 years ago, people would still refer to venture as a cottage industry, right. And it largely was, and it still is today in the sense of like, it's still a very small slice of the asset management pie, but like it's obviously less than it was. But But I think ultimately like venture will experience that exact same kind of growth whether are not interest rates, you know, you know, kind of continuing increasing or decreasing, I think, obviously ventures and net, like all kind of asset classes tend to be alts tend to be kind of beneficiaries of low interest rate environments. Right. So I don't think venture is unique in that regard. But I think my broader point here is like, almost in spite of what happens with with interest rates, I think venture will continue to grow and scale and mature as an asset class. And I don't think it's going anywhere. So

Will Jarvis 20:30

Got it. Got it. I'm curious, you know, you invest primarily in the early stage, correct? Yeah.

eric 20:36

We do. We do kind of full stack investing, but but a lot of what we do is kind of early stage. Yeah,

Will Jarvis 20:40

gotcha. It seems to me that there's this inherent tension where as you get bigger, so you know, as you become more successful over time with contrary, it seems like there's, you know, some pressure to grow bigger funds, etc. But then you have to, you know, kind of go farther, you got to, you know, maybe start have to start investing in series A Series B, you're doing growth stuff, because the piles of cash are bigger, and it's just hard to distribute that and find alpha, if that makes sense, with the deal size are smaller. Is that something you expect to have to deal with? Are you consciously thinking about that? Or it may be keeping the font smaller over time to deal with that? Or what's the long term vision there?

eric 21:19

Yeah. Well, I think, you know, I mean, Mike Maples kind of popularized this, this phrase, which is just, it's gold. And then he's, he's, he's absolutely read anywhere. He says, you know, your font size is your strategy, right. And I think he's absolutely true, right. And I think at a certain point, as a manager, you make a conscious decision as to what you want your firm to be, right. And in the venture world, it's, it's, it's basically, let's say, you know, sub 50 million, it's maybe 50 to 150 million, let's say, in that range. And then it's everything north of that, right. And when your sub 50 million, you can play really nice with everybody, you can get small checks into competitive rounds, you're always collaborative, all that kind of stuff. When you're 50 to 150 million, you know, you can, or even a couple 100 million, like, you can still be somewhat collaborative, you're a little bit more competitive, you're leading rounds now, but you can still get venture style returns, right, you can still kind of five to 10x funds, if you if you're, you know, leading rounds of excellent early stage companies. But once you go that past that kind of like couple 100 million dollar threshold, if you just do the math, I mean, you need to be, you need to be generating massive, massive multibillion dollar kind of exits and returns to put up venture scale kind of numbers. And so you end up building more of a platform. Right. And there's nothing wrong with that. Right. There's nothing wrong with doing what Andreessen has done or whatever, right? Like, you know, I mean, to their credit, right, they build one of the most powerful firms and in all venture by taking this kind of, you know, full stack multistage kind of kind of model. Right. And, but it's just different. Right, you know, the the Andreessen 's of the world are getting the same returns as a $50 million fund, because it's just easier to multiply smaller numbers, right? Again, there's nothing wrong with that. But you just have to understand like, what are you optimizing for, right? are you optimizing purely for, you know, kind of cash on cash returns? Right? are you optimizing for scale? And AUM, like, What game are you playing? And I think once you understand that, then you can basically, you know, figure out what your strategy and your fun side is going to be from there. So

Will Jarvis 23:46

and where do you come down on this? Like, like, do you have thoughts here? And if you don't want to talk about it publicly? That's fine. But But where do you want to be like in 10 years? Do you like that, like, the game you're playing currently? Do you want to change it up and grow into a bigger fund? What were your thoughts there?

eric 23:59

Yeah, I mean, like, I think we're, we're still early in our journey, right? Like, we're, you know, we're kind of four or five years into into investing. And, and I think it's kind of too early to tell, but But I do think we'll remain laser focused on on this kind of core thesis around how to identify great talent early. But absolutely, I mean, we already do this, we want to support those founders for their entire journey. Right? Right. And we want to be there not only their first check at seed, but we also want to, you know, kind of be leading their series A or Series B, or Series C, or whatever it is, right, as they kind of grow and scale their businesses. And so, you know, I don't know kind of what the future holds in that regard. But I think will absolutely kind of continue to grow and scale with our companies over time. I, you know, we won't take that first box, right, we won't, you know, have kind of sub $50 million. I mean, we already are larger than that, right? But like, we will kind of be larger than that $50 million, kind of threshold for sure. Yeah,

Will Jarvis 24:59

that makes sense. I'm going off of that I, I've often had this question about why, like top quartile returns and venture are better than like the bottom 75%? Is it your sense that it's because it's something like ventures kind of a Keynesian beauty contest, where, you know, you as an investor, you're not only thinking about whether this company is viable, but it's whether this company can raise money at the a round B, round C round down the road. So even if like you find, let's say, this, this company, that it's an amazing company, but it's just too weird for any other investors to grok that they'll have trouble raising capital down the road. And can you get around that maybe by self funding startups as they go down? Kind of they're wiped by their lifecycle, like you described? Yeah,

eric 25:45

um, I think the answer is, it depends. I mean, There absolutely are companies where they're just real funky, and nobody wants to fund them. And that's why they die, right. And so either you're left to fund them yourself, or like, you know, and you hope that somebody clicks for somebody in the next 12 months, or like, you know, there are a lot of really weird scenarios out there. But I think the reason why venture returns are so they're not even at 20 they're there, they're, you know, 95 five, right, from a creative point of view, is that it's just an access game at the end of the day, right? And, and venture. Brand is, is is king, right? And the best founders want to work with the best brands. And the best brands are good proxies for talent and additional capital, and customers and all of those kinds of things. And so, you know, having a powerful brand, is I think, objectively speaking, like the most powerful moat in venture right, now, you can screw it up, for sure. And many have screwed it up. But but it takes a long time, you need to really work hard at screwing it up, I think just to screw it up. You know, but people forget that, that, you know, like Excel was struggling before, you know, they, they kind of led Facebook's, you know, Series A, you know, four or five, whatever it was right, like, you know, and obviously now they're I mean, you know, they're absolutely a world class firm. Right? But, but it wasn't always that way. Right? And this happens time and time again, right? There's this huge kind of narrative, kind of, you know, fallacy out there, that oftentimes either observers or certain, you know, LPs that are a little bit newer to venture kind of subscribe to, which is, you know, oh, if I, if I'm going to invest in in kind of venture funds, like, the only the only kind of thing that makes sense is to invest in a, you know, a cocktail party name, right? A Sequoia or whatever, right? It just couldn't be further from the truth, right? I mean, you go back and every 10 years, like almost kind of, to a tee. You know, there is this generation's Sequoia that gets created. Right? And, and you think about a decade ago, it was, you know, maybe kind of, you know, Andreessen and then five years before that it was Founders Fund. And five years before that, it was Lightspeed and five years before that, it was benchmark, right. And, and so on, and on, and on and on, right, like this. This is this happens time and time again, right. So like, your job should be to hunt for the next Andreessen or the next Founders Fund or the next whatever, right? Because they're, they're out there, right. And they're being built right before your very eyes. And those will be the ones that will provide you with to get best kind of asymmetric upside. So

Will Jarvis 28:40

that makes sense. I'm curious, how did you think about bootstrapping brand at the beginning, now contrast? Great brand, but in the beginning, you know, when you're just getting started, how do you think is it like just trying to find that one breakout that can kind of you know, like, like you said, Excel, like finding Facebook or something like that? Or is there anything else you can do to kind of get that going?

eric 28:58

Yeah, I mean, it's, it's, there are so many different kinds of prongs, I think, to kind of that that answer. Right. But I think the most important thing, at the end of the day is consistency. Right? It is like it is understanding that this is a long game. Right? I was just talking with a friend this morning. And, you know, he started investing in venture a decade ago, I think 2010 Actually, and they're still waiting on some of their first returns. Right. You know, they've returned half of the fund are three quarters of the fund, but not the whole fund. So they're not getting care yet. Right? So and we're 1112 years in, right. So it is a long game. And so it requires showing up consistently every single day. Right? And that means making great investments. That means, you know, getting kind of PR where you can that means you know kind of building your Twitter following which is something I have done a poor job of but others on my team have done better jobs of you know, it means like having both people in the engine Stream, your peer set and founders kind of having good things to say about you, right? It's like, these are all things that require years of consistent effort, right? You can't just show up one day, put your hand in the air and say, hey, you know, I'm raising, I'm raising a venture fund, right? Like the people who do do that, oftentimes are people who have been doing it for a decade or more already, right, they already have built that credibility, they already have built that track record. And so then putting your hand in the air and saying I'm starting a fund is, is is a decade plus of really hard work. Right. So yeah, I think that's my answer is it's just, you know, a consistent kind of grind basically, across 5678 different factors. So

Will Jarvis 30:42

it makes a lot of sense. Has it been harder, easier than you thought? When you originally got started? Harder? It's been harder.

eric 30:52

Yeah, harder? Yeah.

Will Jarvis 30:54

Can you talk about? Can you talk about that it just just in all factors? Or is there one particular element that really surprised you as being more difficult than, than you imagined? Um

eric 31:13

I think let me put it this way, I think I would say that building our generation Sequoia, which is our expectation is harder, then probably building a comparable, a comparable kind of sized startup, let's say. And I say that principally because of the brand moat that I talked about earlier. Right. Where, you know, it's funny when you look at startups, right. And you look at incumbents. They tend to not have the best brand, ironically. Right. And so they're actually easier to unseat in that regard. I mean, obviously, there's, there's a whole host of other challenges, right? They're incumbents. So, you know, it's like an oracle or whatever, right? Where, you know, you're just you're trying to just extricate them from the situation, but they can't You can't they can't your you know, just to built in, right. So there are certainly other reasons, right. Why why, you know, it is harder, let's say, from a startup point of view, versus just focusing on brand. And but I think when you when you think about kind of what we've been talking about here for the past 2030 minutes, and there's typically only one, maybe two venture firms every decade, that become household names, right. And you put that in startup parlance, right. I mean, there are many, many, many, many, many dozens or hundreds of startups over a decade period that find a meaningful amount of success. Right. And so, yeah, I think I think it's, I think it's harder. I actually think it's harder than kind of building a building a startup, if that is your goal, right? If you simply want to raise capital and invest in some companies and all that kind of stuff, fine. It's it's, you know, it's hard but doable, right. But if your ambition is to build one of the best firms of our generation, very hard.

Will Jarvis 33:28

Well, it does seem to be quite, it's probably Yeah, generally more competitive, just generally, it is very competitive. Just because, like you said, if it's parallel business there, you know, most deals are not very good deals, finding the good deals, is a difficult challenge and getting in those deals. Although working early stage, you can't get around some of that you're fighting less ever deals, I assume. And more. It's fine to the people, which which seems to be a better challenge to try and tackle.

eric 33:54

Yeah, well, and the vast majority of VCs are just selling a commodity at the end of the day, right? And so that's even more of a wrinkle, right? That's why brand becomes even more important, because if you're selling the exact same thing, which is, you know, cold hard cash, right, like, what is your wedge? So?

Will Jarvis 34:12

Definitely, definitely. Yeah, it's a it's a real challenge. I got another question here. It's been a bluff term. But I asked this to most of my guests. What is common knowledge within your field that lay people might find surprising?

eric 34:33

Think just how much inside baseball goes into the entire industry, I maybe maybe will frame it in the context of fundraising for founders, right. But raising capital as a startup founder is not as simple as kind of putting your hand up in the air saying I'm fundraising, walking into a meeting pitching your company and then in a vacuum, somebody's saying, Yeah, that looks great, let's invest or no, that's bad. Let's not invest. Right? And I think you have to assume that everybody's talking like almost by default, right? Like, if you're talking to a venture firm, that has some shred of credibility or respect, right, like a halfway decent venture firm. They generally will all know one another, to some extent, right. And there are people that yes, have stronger relationships with, you know, certain firms or groups than others. But generally speaking, you know, that is, is kind of the plan. And that is kind of, I think, how it works. And I don't think that's common, right? I think most people would just say, hey, like, I have an idea. I'm gonna pitch it, I'm gonna hope that you know, this person likes it enough to invest. Right? But but you have to assume that that VC is probably talking to whoever introduced them, or how do they know them? And then they're talking about it with a couple other VCs and they're sharing notes and right, like, it's, even though they might not be the same firm, like, everybody is still talking. So

Will Jarvis 36:11

Got it. Got it. So that does seem like to me like, if you are fundraising, you should be aware of that and plan accordingly, I guess.

eric 36:21

Yeah. And I mean, I think it's the reason why. You know, like, if you think about like a, like a, like a v1 of AngelList, right? When they first started 10 years ago, whatever it was, right? Like, the original idea was, like, let's let's, or one of the original ideas is like, let's democratize access to startup investing, right? And like, everybody put your deals on this platform, and we'll fund it or whatever it's like, then and like, at the end of the day, like, that doesn't work, right. And it doesn't work, because like the best deals aren't an exceptional currency. Right? The best deals are very, very, very valuable. And so by definition, like, you have an incentive to keep them internal, either within your own firm or within your trusted kind of sphere of friends. Right? And I mean, that's, like, that's its own can of worms, right, in terms of why that's bad. And, you know, how that affects things like, you know, kind of, you know, access for capital for diverse founders. And like, it's a totally different kind of segment. But but that is nonetheless, the reality today. Right. And so, you know, yeah, I think it's, uh, it just kind of is what it is, as long as the incentives are kind of aligned that way, obviously, a lot of people working to fix that. But it's tricky. So, real challenge.

Will Jarvis 37:32

Do you have any advice for founders who are going out to fundraise? What do most people get wrong? When they when they go to do that?

eric 37:39

Yeah, um

think maybe the, I think kind of the two pieces of fundraising advice I'd give are number one, like you have to, you have to run it like a process. Yep. Much like, much like you would any sales process, right? Like, there has to be a level of structure and rigor that goes into it. You can't just simply say, oh, like, I just don't want to raise like, I'm gonna go talk to somebody this week, and maybe somebody and week from now. And like, you will never raise capital if you don't run a very systematic, rigorous, thoughtful process. So that's, that's number one. Right? I think number two, is understanding the signal and quality of how you are getting in the door. And yes, there are VCs, us included, who will invest in people who cold email you, right? But it's harder, there's no doubt, right? Like, because trust is involved, right? Trust is involved, like somebody is giving you capital, right, and they have a fiduciary obligation to their investors to you know, generate the best returns and to not have that money get lost, right? And so, you know, understanding that, like, hey, if so, and so well respected founder acts, or if another very well respected VC, whatever like is the person introducing you the probability of success that you have goes up along in having, you know, five to 10, HIGH signal introductions versus 100 meetings that came through cold email, like you're, you're dramatically more likely to get one of those five convert than you are, you know, the 100 cold emails. And I mean, this is coming from somebody who, you know, did a ton of cold email in the early days, like it works, but it's a volume game, and it's significantly lower conversion than than the other way. So

Will Jarvis 39:31

that's great. That's really great advice. Well, Eric, thank you so much for coming on the show. Where can people find you? Where can people find contrary if they want to check it out?

eric 39:41

Yeah. Thanks so much for having me. Well, I mean, if you want to learn more about country, best way to kind of, you know, learn more is basically just check us Or, you know, shoot us a note at at or follow us on Twitter. So, love it. Love it. Awesome. Thanks, Eric. All right. Thanks a lot. Appreciate it.

William Jarvis 40:02

Thanks for listening we'll be back next week with a new episode of narratives

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Narratives is a project exploring the ways in which the world is better than it has been, the ways that it is worse, and the paths toward making a better, more definite future.
Narratives is hosted by Will Jarvis. For more information, and more episodes, visit