20VC: Why Convertible Notes Are Ridiculous, Why Party Rounds Are Bad For Both Founder and Investor & Why Pro-Rata Rights Are A Mess with David Waxman, Founding Partner @ TenOneTen Ventures

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David Waxman is the Founding Partner @ TenOneTen Ventures, one of the leading new venture firms in the rising tide of LA tech. Their portfolio companies have enjoyed exits from the likes of Facebook, Google, Amazon Cisco, AirBnB and including companies like eCommerce pioneer and unicorn, Wish and the world’s leading airspace services platform, AirMap. As for David, prior to TenOneTen, David enjoyed an incredible career in operations starting with the founding of his first company, Firefly in 1995, an early pioneer in personalization and privacy technology which he sold to Microsoft in 1998. David then co-founded PeoplePC, a company dedicated to simplifying the process of joining the online world. The company went public in 2001 and was acquired by EarthLink in 2002.

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In Today’s Episode You Will Learn:

1.) How David made his way from selling a company to Microsoft and taking the next public to being one of the leading new managers in LA’s tech scene?

2.) Why does David believe that market sizing is a futile effort, or as he calls it “Tamfoolery”? What is the right way that founders should present the market to investors, both in discussion and visually? Why is it impossible for investors to foresee market magnitude?

3.) Why does David strongly dislike convertible notes? Why does he believe that they are worse for not only investor but founders too? In what rare cases do they make sense? Why are they completely ridiculous in multi-million $ deals?

4.) Why does David believe that pro-rata rights have become such a mess? How can founders honour the agreements with their early investors and satiate the ownership appetite of A funds? How would David navigate this if he were a founder today?

5.) Why does David believe the biggest asymettry in VC is the DD that founders engage with, in comparison to that of VC on Founder DD? How should founders structure this DD on investors? What is the right framework? What is the crucial question to ask?

Items Mentioned In Today’s Show:

David’s Fave Book: The Last Lion: Winston Spencer Churchill: Defender of the Realm

David’s Fave Blog: Strictly VC, Nuzzel

David’s Most Recent Investment: Velocity

As always you can follow HarryThe Twenty Minute VC and David on Twitter here!

Likewise, you can follow Harry on Snapchat here for mojito madness and all things 20VC.

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