VCP 100: Nominate the Top Utah Founders VCs Must Watch! Nominate Now

Jon Bradshaw & Peter Harris

Are founders better at picking winning deals than VCs are? We review a new fund, https://powerset.co/, and discuss the pro's and con's of the model.

Are Founders Better Investors Than VCs?

Jake Zeller and Jonathan Swanson launched a new fund, somewhat unique, https://powerset.co/.

Their thesis is that founders are better investors than VCs.

From their site they say, “Based on our experience working with hundreds of top founders and VCs, we have reason to believe that a certain cohort of founders can be some of the best investors on the planet, both in terms of helpfulness to startups and returns they’ll generate.”

The idea is successful entrepreneurs know other successful entrepreneurs.

Join us on this podcast to see what we think!

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Episode Transcript

Jon: All right. You ready for this podcast, Peter? Let's do it. For those of you that don't know, good, a venturecapital.fm so you can find all of our social links right there for you. And this is going to be streamed on YouTube and also on Spotify. Apple and the major the major podcasting platforms.
 
Peter: Yeah, And if you like this one, we have a couple others you might like to.
 
Jon: Maybe somewhere in the attic. Maybe. Maybe. All right. So power set, Dot CEO. So Jonathan Swanson, founder of Thumbtack. Jake Zeller, who pioneered dangerous syndicates, have launched a new fund. But it's a different type of fund. And I wanted to just kind of discuss it, give it some, see what your thoughts are about it as a VC. But their basic thesis is is based on a question Is are founders better investors than VCs?
 
Jon: And if I look at my own experience, if you look at Paul Ahlstrom, who used to be at spring, the spring's not around anymore, but they used to have this contest called the V 100 and the V 100 was based on it was peer to peer voting founders voting on other founders. And he says if you would have taken the top for the seven or ten years that they did it the top ten founders every year and would have written them a check, he claims Paul Strome claims you would have one of the highest performing funds based on that model and their data.
 
Jon: So he's starting again with the wind 100 peer to peer VC., you know, voting. Yep. Yep. What are your thoughts on on on this model? And he's got some bullet points we can go through.
 
Peter: Yeah. So basically what they're giving founders like a million bucks is invest.
 
Jon: You get to apply to be a to have a fund. So I could I could text Jonathan hey give me a million bucks to invest. And if it goes well, they have an additional 15 million locked up for follow on Future Fund. So they're basically kind of like anointing these founders to be kind of, you know, angel investors.
 
Peter: Yeah, I mean, it's an interesting idea. It's not a new idea, right? You could argue that Sequoia Scouts like way back in the day when they kicked that program off is effectively the same thing. Yeah, they were basically saying, hey, to all these founders, like, here's some money, go scout some deals for us. Right? And you can invest off our balance sheet or out of our fund.
 
Peter: and you know, like we've, we've even talked about this how like some of the best, the best possible entry you can get to a VC is from one of their portfolio companies, right? And the founders. So yeah I think, I think on the one hand like founders tend to be able to identify other like minded, you know, people that are, you know, have a high degree of likelihood of success.
 
Peter: Right. I think that's true. you know, whether or not founders want to spend a chunk of their time hunting for deals, doing the due diligence on those deals is because, like you meet somebody doesn't mean that, like, it's going to be a great company or a great investment, right? so, you know, I mean, those are those are some of the challenges.
 
Peter: I'd be curious what their criteria is for selecting founders. My guess is that it's primarily going to be founders that have kind of already arrived, if you will. and so then it kind of begs the question, too, of, well, are you just like providing capital to these individuals that otherwise would be angel investing anyways? Yeah, I don't know.
 
Peter: Right. I think it's like I said, I think it's an interesting idea. It's not not a particularly new or novel idea in a lot of ways. We'll see what their fun performance ends up looking like, right, Because part of it is they've got to pick the right founders and they've got to make sure those founders stay motivated to actually invest.
 
Peter: Right? And then they got to track all these portfolio companies and continue to invest and support them over time, which also sounds kind of like a headache of trying to manage all of that. I mean, it's definitely like a full time job. And then, you know, what's what's the incentive for the founders to really take this seriously and and dive in, Right?
 
Peter: It's like, great, like a million bucks, you know, it's kind of like I'm playing with somebody else's money. Does that create any sort of misalignment? Right, where it's like, well, you know, it's not my money, right? if they want to give me some free play money that I could just, like, throw at, you know, founders that I think are kind of interesting, then Great.
 
Peter: and look, I, I will always take meetings from my, like, founders in my portfolio, but I have turned down a lot of companies that they've sent my way as well. So it's not just because, like a founder likes another founder, it doesn't mean it's a slam dunk deal either.
 
Jon: So what are your thoughts on like a voting mechanism like the V 100? Like so let's say you and I started a fund tomorrow, which we're not we're not starting off on tomorrow. But we we found founders who have had a success say their company does more than a million RR. Yep. And if they do that, they get ten tokens a year that can be towards an investment.
 
Jon: They would get a very, very small kickback.
 
Peter: So but why would they do it? Like, why invest the time and energy like people people?
 
Jon: The V 100 was probably the most popular tech event with no capital attached. Now attach capital to it. It might go to a much higher level of authenticity.
 
Peter: Yeah, maybe. But v the V 100 also occurred like almost like pre-internet in a lot of ways. Technically not big internet, but like Pre-social.
 
Jon: I got Instagram posts with me and Dylan Dillon. Read Yeah, Austin, his brother and Garrett G's brother at the V 100 the last few. 100.
 
Peter: Yeah, but I guess my point is like it was a slightly different world.
 
Jon: Do you think it wouldn't work now?
 
Peter: Could work? I don't know. Like, okay, here's here's. Here's my thought. Like the V 100 worked in Utah because V spring at the time was like the one of one of, if not the biggest game in town from a VC perspective. So everybody like it carried a certain level of prestige that I think is hard to replicate. If Sequoia came around and said we're going to do the Sequoia 100.
 
Peter: I think that would be super successful, right? But I think if it was like the John Bradshaw Venture Fund, you know, 100, I think, no offense, I think that would be more challenging until you built up like a really strong brand and everybody was like, I want to participate in this because it's prestigious. And I'm hoping that like, I get up in that rankings that, you know.
 
Jon: I think you're prestigious and I think this is something that you and Thompson knew too long.
 
Peter: All right.
 
Jon: Fair enough. So another set aside million, 2 million a year as prize money for this competition and break it up for the top ten.
 
Peter: Well, I'm very flattered you think that I'm a big deal, but.
 
Jon: I let's let's see how you've got a couple million you can go burn. Let's see how this works. 2 million for the next is.
 
Peter: Exactly what my help is on here. Yeah, we're going to just, like, burn a couple of million dollars. Sure.
 
Jon: Paul Ostrom would give you the first two.
 
Peter: Well, Paul is going to see it as competition, right, Because he's got his one 100.
 
Jon: Just find a way to cut him in. He didn't invent the 100 thing. Yeah. There's a bunch of 30 or 30. 40 under 40.
 
Peter: Yeah, but the key to this is that you're using, like successful entrepreneurs to identify other successful to the next. Yeah. The next wave of successful entrepreneurs.
 
Jon: To be fair, I didn't belong at The View 100, but somehow I got voted on. And you belong to my critique of the the Win 100 Wasatch Innovation Network is that the people I think that should have been there.
 
Peter: Yeah. Yeah. Why weren't they there?
 
Jon: I think it takes a couple of years for a program to kind of get ironed out.
 
Peter: Yeah. And build a reputation. I think the other thing too though is like more and more it's like the people that are really like making it happen. They don't go to events because they're too busy cranking, right? Yeah.
 
Jon: That's. They make it 5 million. There we go. Problem solved.
 
Peter: Like the people that you know, that have like those events are typically like, you know, people that are trying to like network and like, think they're hustling, but they're not actually like building.
 
Jon: Where you had an event today.
 
Peter: I was.
 
Jon: Thinking, you're hustling.
 
Peter: Now. I was there to support one of my the company I sit on the board of.
 
Jon: So can you name the name.
 
Peter: Yeah, I sit on the board of City Labs. Okay. We're number 16 on the Utah 100 fastest growing companies. Very, very proud of what they've built.
 
Jon: That's awesome.
 
Peter: And, you know, I was there to be supportive and and. And get some lunch, so.
 
Jon: Yeah, that's good. I think the biggest question I got us today is who are you with? And I'm like, Can I just come on my own? I don't get that. At other events, they're like, Who brought you? How do you bring in who who.
 
Peter: Let this character into the.
 
Jon: Doors? Overpriced lunch for 150 bucks. What? What's up, guys?
 
Peter: Yeah, nothing wrong with that.
 
Jon: I mean, they.
 
Peter: Had but look like for you and your business, like being at those events makes sense, right? Because your business is all about meeting those types of companies and, like, getting them to hire your code base, right?
 
Jon: Yep. I sat right next to, like, I'm.
 
Peter: Talking, like.
 
Jon: Overstock.com.
 
Peter: Hey, like, I've got this new app that I'm building, but really, like, I'm at this conference all day long, like watching speakers and stuff instead of being in, like, my office cranking on actually building the app and getting customers and everything else.
 
Jon: Yeah. Why don't you start a syndicate? You do a syndicate on the site.
 
Peter: Now Because I run a venture fund.
 
Jon: Why don't you? Can you stack your funds more?
 
Peter: What do you mean, stack like raise more funds quicker? Yeah, theoretically, yeah. Why not? I don't know. We probably. Well, okay, I'd like to see that degree.
 
Jon: You got to keep up with the latest. What's the biggest what's the biggest VC fund in Utah right now is out album or Kickstart.
 
Peter: The biggest, I think is probably pelion.
 
Jon: I mean especially on right now.
 
Peter: No, no I know they're they're raising or just closed a fund recently and it's hundreds of millions of dollars. I don't know.
 
Jon: Yeah, I'm not going to speak on behalf of Pelin anymore because I got reached out by a partner early on. They're like this. This is not true. What you said on the podcast. And I'm like, Well, it wasn't public, so it wasn't technically true. It was like the rumor on the street is they hadn't done a deal since February.
 
Jon: It turns out they had done a deal in June and I was posting my July 1st is that they hadn't done anything since February.
 
Peter: Yes.
 
Jon: So I deleted the LinkedIn Post podcast is still out there.
 
Peter: So you got slapped.
 
Jon: I felt he offered dividing lines. The partner from the firm. So those. Okay, I should take them up on it. So if it's good. You said I was waiting for you because I mean, you just podcast to do lunch at the same time.
 
Peter: Great.
 
Jon: All right, Peter. Well, thanks, guys. Let us know if you had more questions. Go to venture capital.
 
Peter: Let me ask you, though, if you are a founder, would you be more inclined to take money from another founder in this like fund structure or from a venture capitalist?
 
Jon: I won't blank on that. I mean, I just feel like the amount of time it takes to fundraise that I don't know how big that founder's pockets are. Yeah. Although it would be nice to to be anointed by like two or three people who are like, Hey, here's 50 K Yeah.
 
Peter: The Josh James comes to you and he's like, Here's 58.
 
Jon: Yeah. So like when early this year is trying to raise for appointment dot com, I said I'm going to try to raise junior 50,000 here in Utah and then go to Silicon Valley and use that 250 as a signal of a here's a good deal. Yeah. At that same time the market crashed maybe, you know, just whatever happened, we decided to pause and I think it would be nice to have someone like that with a check.
 
Jon: But I you know, most of my founder friends, I'm assuming no matter what their car they're driving, that they're all probably broke. Yeah. And I just don't ask them for money. Yeah. So unless they're published on a list, I wouldn't know who to go after. Yeah, but then, you know, and then the other thing is, is a lot of angels right now, I think are teaming up with syndicates because there's lots of work.
 
Peter: Yeah.
 
Jon: Involved and it's easier for them to do deals. But I'm a believer you should avoid syndicates to lead and that could just be outdated or a biased opinion actually. What do you think? Should a founder have a syndicate lead?
 
Peter: well, if they have no other options, then yes, but is it ideal now?
 
Jon: What about McKay Dunn? Would you like McKay Dunn leave your deal? And I would say yes, based on he's come out he left signal Pete, and has come out swinging and has done several seven figure investments. Yeah. So from that standpoint I would look at him as a very different SPV.
 
Peter: Yeah, that's probably true. I mean, the big challenge with SPVs and syndicates is like the risk of the party round, right? and look, I like McKay a lot and I agree, like he's running something slightly different, but there is some risk that like what happens when the company that he backed stumbles and they need more money. He's got to go back to his LPs or not.
 
Peter: Now, as LPC says, investors in a syndicate and convince them to put more money in, whereas if he had a dedicated fund, just say like, Hey, I've got I still have high conviction here, blah, blah, blah, like we're doing this and there's that isn't that risk that you wouldn't be able to raise it.
 
Jon: With McKay Dunn isn't this is do you see the SPV as a stepping stone to a fight or I think you're just going to I mean, I.
 
Peter: Think that's a better question for him than me. But your gut like my gut is that maybe funds make life easier.
 
Jon: It's not like you have to hurt cattle every time you do. Exactly. Once every five years, raise another fund, give them their quarterly updates, go slay the dragon.
 
Peter: Yeah. And look, you can take more risk and stuff. Like if I have to go out and I have to convince all of my LPs on every single deal that it's going to be a homerun. Success. Like there are always going to be some LP that are like, I don't buy this right, or I'm not comfortable with the risk or whatever it might be.
 
Peter: And so it makes it harder to have consistency on like funding deals, right? But if they're all in the fund and they're basically saying, like, I trust you, right? That I can do things that are a little more risky, that have the potential to generate a higher payoff based on like, you know, the amount of conviction I have and like my own expertise and diligence and so on and so forth.
 
Peter: I don't have to convince them.
 
Jon: I'm going to put you on the spot. Yeah. In the venture capital lot for multiverse. You see what he did. There you are now the CEO of appointment dot com. Okay. McKay Dunn offers you $1,000,000 as a syndicate. You take it.
 
Peter: Do I have any alternatives now then? Yes, And that's what I said at the beginning. You have alternative. You don't have any alternatives. Yes. Take the money because your.
 
Jon: Album offers you $1,000,000 check.
 
Peter: Or McKay Dunn. Yes. like all things being equal, I probably lean towards more lean more towards a fund than a syndicate.
 
Jon: Okay.
 
Peter: Because of the reasons I just described.
 
Jon: And we've got friends at both funds, and I think I was with McKay today. I think he's awesome.
 
Peter: Yeah, and I agree. I think he's a great investor.
 
Jon: Yeah. What other scenario should I give you? The listeners would be asking.
 
Peter: Look, I think what I do want to say, though, is one of the things you have to be careful with syndicates is this idea of a party round where like and this is an area where I think McKay is different is McKay comes in, writes a big check, takes a board seat in some cases, right? Like he operates like a traditional VC.
 
Peter: I think some syndicates, it's like it's like, Hey, I like this deal. I'm just kind of shopping it. We're all going to kick in some money and we'll let it ride and see how it goes. But when like, you know, it hits the fan who's really responsible at the end of the day and is the person that's like pulling the syndicate together, really that person that's going to be there in your corner helping you build, blah, blah, blah, blah, blah.
 
Peter: And in many cases they're not right. And I think that's that's kind of the downside or one of the downsides and risks of a syndicate.
 
Jon: But I would argue over a fund. McKay would be different than a lot of syndicates.
 
Peter: That's what I just said, is that is I think he.
 
Jon: Is different than a lot of guys. All right. We better end this right here because it got awkward.
 
Peter: Because you're not listening to me.
 
Jon: It's okay. I'm low on sleep. Wake up, Wake up.
 
Peter: All right.
 
Jon: You got to get ready for your trip tomorrow.
 
Peter: I do a flying to Atlanta for Venture. Atlanta?
 
Jon: What is venture? Atlanta? I want to give it a shout out real fast.
 
Peter: It's a big tech conference. How big an Atlanta reference? Remember, it's like 1700 people or something. I could be out in the.
 
Jon: Numbers Thursday and Friday.
 
Peter: It is Wednesday, Thursday.
 
Jon: Wednesday, Thursday.
 
Peter: Now, it's the biggest tech conference, I believe, in the southeast. So a lot of fans, a lot of entrepreneurs flying in from all over, you know, a lot of locals. So should be fun. went last year was a great event. Probably one of the better conferences I've been to.
 
Jon: When you go to conferences.
 
Peter: For this one, go into the.
 
Jon: Conference.
 
Peter: Like, do I sit down on the panels? Rarely do I just sit in the lobby and talk to people.
 
Jon: So what I do now.
 
Peter: Well, I think it's honestly, what kind of people do. I mean, you know, I did kind of bash people that go to conferences. But the flipside is what is nice. I don't know. I think if you're like, I'm very biased. I think if you're sitting in the panels, you're kind of missing out on the whole point of the conference and the whole point of the conference, in my opinion, is that a have created this event as an excuse for everybody to come together and meet in one place and because everyone's all together in one place, it allows you to be super efficient and meet tons of people very quickly and like have spontaneous connections and
 
Peter: ideas and all these other things that come, come, come about because of it. And so if you're just sitting by yourself in the auditorium or, you know, whatever, listening to panels, like you might pick up some tidbits here and there, but you're missing out on like the big networking opportunity that's happening just outside the doors.
 
Jon: So maybe for our Metaverse venture capital firm world, we should create a conference that just does just that. It's a conference without without speakers.
 
Peter: Yeah, well, so there's a there's a VC, David Hornick, who actually launched a conference called the Lobby, and, he actually was at August Capital, left August and launched a new venture fund called Lobby VC based on his conference. But the idea behind Lobby was that very premise, which is that like anytime he went to conferences, he just hung out in the lobby the whole time and just talk to people.
 
Peter: And so he's like, Well, what's the point of like all the panels and dinners and blah, blah, blah? Like, if all I'm doing is like hanging out in the lobby, what if we launch a conference called the Lobby and we don't have panels, We have like icebreakers and networking? And he he made it like this super exclusive, super high end event where like only 300 people were invited and you could kind of pick and build like the ideal audience for whatever the topic of that conference was.
 
Peter: So maybe it was like this year we're going to talk about fintech. And he would find, like all the leaders and fintech and then it would be like this honor to get invited to this conference. It was super exclusive and blah, blah, blah. I think something like that would actually be super fun.
 
Jon: And the awesome metaverse venture capital firm should do it.
 
Peter: Yes, or maybe just venture capital, David. Not a firm should do it or.
 
Jon: A little bit or.
 
Peter: Little girls go on something vague.
 
Jon: All right. Well, that sounds good.
 
Peter: All right. Thanks for joining us for the Venture Capital podcast.
 
Jon: All right. We'll see you soon. Go to venture capital firm and we'll talk to you later.