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
The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
The Twenty Minute VC
4.4 • 637 Ratings
🗓️ 29 November 2017
⏱️ 26 minutes
🔗️ Recording | iTunes | RSS
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Summary
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.
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 Harry, The 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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Transcript
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| 0:00.0 | Welcome back. This is the 20 minute VC with me, Harry Stebbings, and you can find me on Snapchat |
| 0:04.0 | at H. Stebbings with two Bs. All ads get a personal response from me. An exciting news, if you did not |
| 0:09.5 | listen to our episode with Kleiner Perkins, Bing Gordon on Monday, that really is a must, by the way, |
| 0:14.0 | then you will not have heard that the 20 minute VC now has a fantastic app. Essentially, it's |
| 0:18.6 | your centralized home for all things 20 minute VC. So you can easily |
| 0:22.1 | tag episodes and go back to them at later dates, easily find and buy resources mentioned in the show, |
| 0:27.4 | and most importantly for me to continue improving the content, you can rate episodes and provide |
| 0:32.0 | feedback. A huge thanks to Jason Humphreys for all his work to make the app as brilliant as it is, |
| 0:36.6 | and you can find it on the app store by searching 20 VC, that's 2.0 VC, I'd love to hear what you think. However, to the |
| 0:43.0 | show today, and one of my many joys of this role is shining a light on some of the incredible |
| 0:47.3 | individuals who maybe do not have the public attention of others, but a core to ecosystems. And that's very much the case today, and I'm thrilled to welcome |
| 0:54.5 | David Waxman, founding partner at 10110 Ventures. One of the leading new venture funds in the |
| 0:59.8 | rising tide of LA Tech. Their portfolio companies have enjoyed exits from the likes of Facebook, |
| 1:04.8 | Google, Amazon, Cisco, Airbnb, and include companies like e-commerce, Pioneer and Unicorn, |
| 1:10.5 | Wish, and the world's leading |
| 1:11.7 | airspace services platform, AirMap. As for David, prior to 1010, he enjoyed incredible success |
| 1:17.2 | in operations, starting with the founding of his first company, Firefly in 1995, an early pioneer |
| 1:22.6 | in personalization and privacy technology, which he sold to Microsoft in 1998. David then co-founded People PC, |
| 1:29.7 | a company dedicated to simplifying the process of joining the online world. The company went public |
| 1:34.5 | in 2001 and was acquired by Earthlink in 2002. I'd also want to say a huge thank you to |
| 1:39.4 | Saul Klein at Local Globe for making the intro to David's day. We really do appreciate that. |
| 1:43.9 | But before we |
... |
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