20VC: David Tisch on How Multi-Stage Funds Changed The Game For Seed Rounds, Why Signalling Risk is BS, The Three Most Important Variables for Founders When Raising Their Seed Round & A Debate on Portfolio Construction: Does Ownership Matter

Posted on 27th February 2023 by Harry

David Tisch is the Managing Partner of BoxGroup, one of the leading seed-stage investment firms of the last decade having invested in over 500 seed-stage startups, including Plaid, Ro, Ramp, PillPack, Amplitude, Flatiron Health, Stripe, Warby Parker, Harry’s, Oscar, Flexport, Classpass, Vine, GroupMe, Airtable and more. David is also the Chairman of GoodDog, a marketplace to find pets online.

In Today’s Episode with David Tisch We Discuss:

1.) From Techstars To Founding BoxGroup:

  • How did David start his own firm in the form of Box having started at Techstars?
  • What advice from Brad Feld does David always remember and hold close?
  • What does David know now that he wishes he had known when started investing?

2.) The Debate: The Math Does Not Work: Portfolio Construction:

  • Ownership Does not Matter: How does David justify writing $100K checks from a $127.5M early-stage fund? Even if it is a home run, it does not make a difference to the fund?
  • Level of Diversification: If David is writing small checks like this, with his fund size he will have hundreds of companies, what does David believe is the right level of diversification?
  • Reserves management: How does David think about the ratio of initial to reserves when deploying the funds today? How does reserves management change in a recession?
  • How does David prevent other VCs from using this to try and push him down to always writing a $100K check?
  • Why does David believe that the size of check he is able to invest is the VC’s problem and not the founders?
  • Price Sensitivity: How does David assess his own relationship to price today? Why does he believe that company valuation is not something that the investor controls?

3.) Advice to Founders Raising Rounds:

  • What does David believe is the #1 role of the CEO?
  • What are the three most important variables for founders to focus on when raising their round?
  • How should founders analyze the tradeoff between the brand of the VC and the size of the round?
  • Does signaling really make a difference when a large fund invests at seed?
  • How did multi-stage funds change the seed landscape forever with a new product?
  • Who does David believe are the tourists in early-stage venture? Will they leave in the recession?

4.) David Tisch: AMA:

  • Why does David believe that consumer social is not fun anymore?
  • Who when they send him a deal does David take it most seriously?
  • How does David want to ensure that bad VC behaviour is exposed?
  • What would David most like to change about the venture landscape today?

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