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• Shifting Dynamics in VC Investments: Venture capitalists (VCs) are becoming more selective in their investments, focusing on true business potential and founder-VC alignment. This shift is driven by a challenging market environment, including reduced IPOs and acquisitions, which has forced VCs to reassess their strategies and priorities.
• The Rise of Operating VCs: Increasingly, VCs are differentiating themselves by offering operational support beyond capital. This includes specialized expertise, industry connections, and access to unique resources, such as securing exclusive deals (e.g., GPUs for startups). However, founders remain cautious, often prioritizing valuation over these added services.
• Founder and VC Fit Matters: Both founders and VCs are emphasizing the importance of personal compatibility, recognizing the long-term nature of their partnerships. VCs are also focusing more on working with founders who demonstrate self-awareness and a realistic understanding of their business challenges.
• Evolving Founder Mindset: Founders are increasingly thoughtful about capital needs, opting for venture funding only when it serves as a clear accelerator for growth. The focus has shifted from raising large rounds for hype to building sustainable, scalable businesses that align with market realities.
Creators and Guests
What is Revenue Brothers?
What happens when a VC and a CEO come together?
– They nerd out about all things revenue. And they don’t always agree.
Raul Porojan of Project A Ventures and Toni Hohlbein of Growblocks are the Super Revenue Brothers. In every episode they dissect and debate current issues in B2B SaaS, and offer solutions on how to solve them
No matter if you’re an early-stage startup or a scaling unicorn – you’ll always learn something new.
[00:00:00]
Toni: What I'm gathering, even from more junior,.
Toni: You know,~ kind of, ~[00:00:03] I call them the SDR VCs, ~uh, ~that are taking the first [00:00:06] couple of calls, I think they're starting to be a little [00:00:09] bit more, ~uh, ~not just only looking for roping in another [00:00:12] deal and getting a pat on the shoulder. But ~I ~actually ~kind of from, uh, from ~[00:00:15] looking for real businesses there.
Raul: ~You know, funny, ~do you know this meme, ~um, ~if these [00:00:18] people could read, they would be very offended. ~Um, there, there, there's, there's kind of a meme, uh, that makes kind of fun of a certain group of people, whatever it is. It's a bit offensive to a certain amount of people, but, um, what you just said there, uh, my, my thinking immediately went to, ~if a junior [00:00:21] investment managers knew what an SDR was, they'd be very offended at your [00:00:24] comment. Um, so
Toni: [00:00:27] So I've been having [00:00:30] a cough [00:00:33] for the last, I don't know, month or something [00:00:36] like this. But it seems to be over now.
Toni: So I hope this holds up for [00:00:39] today's episode, Raul., , what is it we're going to be chatting about today?[00:00:42]
Raul: I think it's going to be fine ~if you, ~if you keep drinking your [00:00:45] nice Thai Chang water. ~Um, ~so as everyone might not know [00:00:48] yet, ~uh, ~Tony is actually in Thailand, which is funny because [00:00:51] I used to do half of the recording last year from there. He was in [00:00:54] Europe. Now the roles are reversed. I'm in Europe and [00:00:57] Berlin. ~Um, ~so it seems like ~there's all these, ~the world is very small [00:01:00] for us, I guess.
Toni: Yeah. And ~if, ~if someone is wondering, ~yeah, this is, ~this is me [00:01:03] with, you know, just AirPods, ~uh, AirPod, ~mic quality. ~Uh, ~[00:01:06] so this is how I usually sound, you know, without the [00:01:09] fancy equipment. ~Um, ~
What you need to know about VCs in 2025
---
Toni: but, ~uh, ~Raul, ~what is it going to be? ~What do we want to talk about [00:01:12] today?
Raul: So I think one thing, and we've spent a couple of minutes thinking [00:01:15] about this in the beginning, ~um, ~is obviously [00:01:18] there's these classic what's happening in 2025 topics and all that [00:01:21] stuff. And maybe we're going to do one or two of those as well. But there is [00:01:24] one thing that we've seen. Recently, where [00:01:27] people are starting to behave maybe a little bit [00:01:30] differently.
Raul: And, ~um, ~we're actually both curious on why that is and what [00:01:33] that actually means. And that's another group of [00:01:36] vectors. That's VCs. So there's [00:01:39] seems to be some trends in VC behavior, ~um, ~[00:01:42] that are first of all, I think, interesting to talk about, [00:01:45] but then also, ~um, ~good to be aware of if you're looking [00:01:48] to work with VCs.
Toni: Yeah, and I think the [00:01:51] reason why our insights might be relevant one is, ~um, ~you [00:01:54] obviously work for project a, which, ~uh, ~has [00:01:57] been, ~uh, ~or still is very, you know, operational VC or [00:02:00] operating VC. I think they have an operating arm that kind of helps the [00:02:03] companies. Right. ~Um, ~but also I'm currently with my [00:02:06] new venture on the funding trail, talking to some of the VCs out [00:02:09] there.
Toni: And, ~um, ~you know, there, ~there's some, ~there's some interesting learnings where [00:02:12] I'm also seeing, Hey, some of that stuff is [00:02:15] different from last time. I've been fundraising in [00:02:18] 21, 22. Right. ~Um, ~so, and I think this is, it's, it's really an [00:02:21] interesting topic. Stuff is changing right now. [00:02:24] And, ~um, uh, ~and we just want you guys to be aware.
Toni: I don't see if you [00:02:27] have similar, similar perspectives on this. , [00:02:30] Raul, maybe you kick us off ~with.~
Toni: What has been happening? Kind of [00:02:33] what is the problem here? That, that [00:02:36] VCs has been facing in the last couple of years that [00:02:39] might trigger some of that change that we're [00:02:42] seeing. ~Yeah.~
Raul: So I wouldn't go as far as saying that there is [00:02:45] any VC crisis or anything like that going on, but [00:02:48] the. I don't know if I would say the golden years are [00:02:51] over, ~uh, ~they're, they're probably coming back again, ~uh, ~but [00:02:54] there is a little bit of skepticism around the model in itself and [00:02:57] about, ~um, ~is it going to forever last [00:03:00] that all we do is like collect money and distribute that and, and we're [00:03:03] riding this wave and we're all going to collect a huge management fee.
Raul: [00:03:06] So. ~Um, ~this is ~what we, ~what we all want to do ~is like, ~is VC really this great thing [00:03:09] and, ~um, kind of a self writing, like ~kind of a self developing vehicle. ~Um, ~and some [00:03:12] people in VC are becoming a bit more ~skeptic, uh, ~skeptic about that. And [00:03:15] I was starting to think, well, it's not that easy. Like [00:03:18] it's still a great business model and it's still a great thing and [00:03:21] unworthwhile thing to do with my time.
Raul: ~Um, ~but [00:03:24] we're trying to go about that a little bit in a different way and to differentiate [00:03:27] ourselves. I think this is the one thing that I see, ~um, ~[00:03:30] especially in the last year. ~And ~
VC Differentiation Strategies
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Raul: funnily enough, as I said, ~like ~coming from project eight, [00:03:33] this was always something that was very ingrained in that [00:03:36] we see in particular, ~but, um, ~more and more VCs are now looking to [00:03:39] differentiate themselves beyond the money alone, ~but, ~[00:03:42] and ~then ~probably seeing that the money itself is just not [00:03:45] enough to attract the top talent anymore and to attract the top, ~uh, ~[00:03:48] fundings anymore.
Raul: ~Um, ~but then also that, that would make the model a [00:03:51] bit better.
Toni: ~So I'm, I'm just also wondering. ~So, ~um, ~what we've seen at [00:03:54] least is, you know, the VCs are basically one [00:03:57] step down from the public markets, right? Kind of, they kind of [00:04:00] really need those to, Either acquire [00:04:03] businesses or consume IPOs for the VCs to make [00:04:06] money. I ~can ~know that's how the whole business model basically works for them.[00:04:09]
Toni: And then it's been pretty shit for the last four [00:04:12] years. I would say, you know, there's more and more voices [00:04:15] that in 25 things are going to get better and so [00:04:18] forth ~and. ~We're going to have new liquidity going into the system [00:04:21] and then the VCs ~can tell, we ~can pay ~their, ~their bosses, their [00:04:24] LPs, their limited partners, their investors.
Toni: ~Um, ~but who knows? [00:04:27] Right. And ~I think, ~I think from at least my perspective, ~uh, ~[00:04:30] having talked to some VCs on and off the funding trail, ~that, um, ~it's [00:04:33] been pretty tough years actually. ~Uh, ~and some of them have even [00:04:36] started to go as far as to say like, Hey, maybe [00:04:39] this, cookie cutter approach to building [00:04:42] companies and, ~you know, ~making them public and then getting [00:04:45] cash from that, maybe that doesn't actually work.
Toni: Kind of a [00:04:48] lot of folks have been looking at, you know, Y [00:04:51] combinators. So YC is like some of those [00:04:54] examples of. Hey, you just get a batch of a hundred companies in and [00:04:57] then 10 of them really make it far. ~Um, ~and some VCs have signed to kind [00:05:00] of question whether or not that's, you know, that's [00:05:03] possible. I think some of VCs even went so far to be like, [00:05:06] Hey, you know, maybe we don't need that much deal flow.
Toni: Maybe we [00:05:09] need to be more selective. Maybe we need to be more [00:05:12] picky in whom we actually going to go for. Right. And, [00:05:15] and then lays kind of a twofold [00:05:18] problem that we want to dissect to today. I think one [00:05:21] is. If you're more picky, ~um, you know, ~chance is gonna [00:05:24] be, everyone in the industry is gonna be more picky.
Toni: So really [00:05:27] it's gonna be about fewer investments that you make. [00:05:30] Cool, great. But, you know, ~how do you, ~how do you then actually [00:05:33] differentiate yourselves? How do you actually kind of make those deals happen, [00:05:36] basically? Right. ~Um, and um, uh, ~and then I think on the other side. It's [00:05:39] like, ~do you, you know, you know, ~what does picky then actually mean?
Toni: ~Right. Do you, ~do you want [00:05:42] to be a bit more risk averse ~as a, as a, ~as a VC or, [00:05:45] you know, ~what, ~what does it actually mean to be picky as a VC? Right.
Challenges in the VC Model
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Toni: [00:05:48] So ~let's, ~let's maybe dive into the latter one first, because I think [00:05:51] this ~is ~might be ~on, ~on people's minds a little bit more when they're going [00:05:54] out fundraising.
Toni: ~Um, ~what does it mean you think to [00:05:57] be more picky, ~uh, as a, ~as a VC these days, Raul? ~I~
Raul: I think these two [00:06:00] things belong together, actually. And so [00:06:03] when you are making a [00:06:06] better conscious or unconscious decision to be more [00:06:09] picky, I think a lot of times this goes hand in hand with [00:06:12] a better understanding of [00:06:15] What it is that you can deliver to a company. ~And so, um, ~there is the, I'm [00:06:18] not, I'm not saying ~all, ~all VCs have switched to that, but there's kind of the [00:06:21] old view of, Hey, we're just going to make a lot of bets [00:06:24] and, ~uh, ~because the whole market is moving upwards, ~uh, ~that's going to be great for [00:06:27] us.
Raul: And, uh, we're gonna lose 90 percent of them and [00:06:30] that's going to be work out great too. Yes, [00:06:33] that is still the case. And that is still kind of the fundamental business [00:06:36] model, but we have realized that [00:06:39] we can also add value beyond that. ~And, uh, beyond just the money. ~And [00:06:42] so I think ~when companies, when, ~when VCs are trying to become more picky, part [00:06:45] of the pickiness is looking for better fits between [00:06:48] what they can help a company with beyond just the [00:06:51] cash and what that company would need.
Raul: ~So, um, that is obviously there. ~And then [00:06:54] this goes into a couple of different verticals. Obviously that is, [00:06:57] Hey, ~um, ~we're a crypto investor and, ~uh, ~we can kind of like [00:07:00] deliver value that way, whatever that means we have previous. ~Uh,~ history of [00:07:03] that kind of investment. We have a little bit more understanding of that, ~whatever.~
Raul: ~Um, ~it can [00:07:06] also be, and, and there's, the list is really, really long, but it can [00:07:09] also be things such as just a regional focus, but [00:07:12] those are kind of like the old, old ones. What's happening more [00:07:15] and more is also more and more, ~uh, ~expertise in building the companies.
Toni: [00:07:18] think one, one example that I stumbled over is [00:07:21] Andreessen Horowitz. I mean, everyone knows these guys. ~Um, ~I [00:07:24] think they were able to secure GPUs, ~uh, ~[00:07:27] for their, ~you know, ~startups, ~um, ~that they're then basically [00:07:30] distributing. So they were making larger deals with Nvidia to [00:07:33] get those GPUs to then distribute it to the smaller [00:07:36] companies.
Toni: In the portfolio, you otherwise couldn't make those deals, [00:07:39] right? So this kind of goes to show a little bit, hey, these [00:07:42] VCs are trying to differentiate a little [00:07:45] bit. ~Um, ~my question to you is, ~I mean, ~you know, ~you, ~you kind of selling this [00:07:48] stuff to a degree, right? Kind of you grew up in, you know, as an [00:07:51] operating guy and in those VCs, but what's [00:07:54] your, what's the experience?
Toni: Does that actually work? ~Um, ~do [00:07:57] people take those? ~You know, it's, ~it's that differentiating enough for [00:08:00] people to be like, Oh, you know what, ~um, ~I'd rather take [00:08:03] a lesser so good deal with the lesser [00:08:06] brand of a VC, but I get this operating [00:08:09] stuff in return. Does that actually work to founders [00:08:12] go for that in your experience?
Raul: So I was going to say yes until [00:08:15] you said your second to last sentence, which is, I don't [00:08:18] believe that founders necessarily take less of a [00:08:21] valuation, ~uh,~ and kind of make that trade off. I don't think [00:08:24] that's really how that works.~ Um, ~obviously yes, to some degree, and [00:08:27] not all the valuations are going to be the same, but I do think that [00:08:30] typically the way that it works is just, just look, you just look for a lead [00:08:33] investor.
Raul: And if you're lucky or doing a good job, you maybe have [00:08:36] one or two options and you're going to go for the best [00:08:39] valuation probably, or the best overall package. ~Um, ~I think that trade off [00:08:42] is not the hallmark of this.~ Uh, ~but it's more of that [00:08:45] kind of in a sea of very similar offers. [00:08:48] Or kind of converging offers towards a certain size [00:08:51] that this is, you have this one VC who's [00:08:54] maybe has a better brand, and then you have another VC who maybe has [00:08:57] kind of a, a more of a expertise.
Raul: And then the other is [00:09:00] gonna give you like, great GPU prices, whatever. ~Um, ~and then you [00:09:03] kind of make a decision. But from a VC point of view, the [00:09:06] more of these you stack on top of each [00:09:09] other, the better that probably is for you because there is some. [00:09:12] Fundamental things that are great to have as [00:09:15] a VC, as a value add, and the more you stack on top of [00:09:18] those each other, the better.
Raul: So obviously brand [00:09:21] is a big one, right? Having money and then making sure that you [00:09:24] have follow on money, having networks, platform is [00:09:27] being a big term nowadays. ~Um, ~kind of like having a [00:09:30] bigger network of people that you can refer them to, advisors, [00:09:33] all that stuff. And then there is more and more that is [00:09:36] just universally better than ~then ~not having it.
Raul: So I think [00:09:39] what's happening is that VCs are less kind of trying to [00:09:42] position themselves as oh, we're the GPU VC where we're [00:09:45] pulling money and then making big deals happen, but [00:09:48] more so that they see kind of these five, [00:09:51] six, seven different things and are trying to do their best to [00:09:54] expand on those. And in a case of something like Project [00:09:57] A, obviously that is a very, very special case.
Raul: [00:10:00] So we kind of have to take that out of the equation because, ~um, ~[00:10:03] there's possibly a handful of VCs in the world like [00:10:06] Project A, ~uh, ~because they have a 120, [00:10:09] 140 people ~on the, ~on their own payroll, ~uh, ~to help, ~uh, ~ventures with. [00:10:12] So if you ask me, does that work in the sense [00:10:15] of the, can every VC do that? Well, no, in the sense [00:10:18] of, is that something that project has helped their ventures with?
Raul: Yeah, [00:10:21] absolutely. And our venture is loving it. Some of them, yes. Some of them not.
Toni: [00:10:24] So I actually want to take it back to something that you said [00:10:27] earlier about this, ~um, ~because I [00:10:30] think it doesn't work as a differentiator. I think it doesn't work.
VC and Founder Dynamics
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Toni: I [00:10:33] think founders like, you know, we are, we are way [00:10:36] too full of ourselves to be like, Oh, you know, really this, you [00:10:39] know, this operating thing that could really help me right now.[00:10:42]
Toni: You know, I'm the operator, you're the money giver. ~Uh, ~thank you very [00:10:45] much. And, and, you know, I'll, I'll call you back when I need more money. [00:10:48] Right. So I think from that perspective, I think, ~uh, ~people [00:10:51] are way too arrogant and, and I would even say [00:10:54] rightly so to a degree. Right. We can debate that. ~I think the other thing that, that feels, you know, way more interesting actually is.~
Toni: As [00:10:57] a VC, basically saying, Hey, [00:11:00] we have ~a, um, with ~a unique value proposition, we can help [00:11:03] a team, a company in this specific area here. [00:11:06] And by doing that, we [00:11:09] increase our chances of this investment of this bet [00:11:12] of ours to work out. So they kind of look at it, ~you know, as a, ~as a [00:11:15] VC perspective. And then basically, ~you know, ~this pickiness [00:11:18] doesn't necessarily mean that the company needs to be better.
Toni: What [00:11:21] you meant there was actually, Hey, the pickiness comes from, [00:11:24] They focus more on VC company [00:11:27] fit, so to speak, and, ~and through that, and then ~through their [00:11:30] operating health, whether that's being a platform that's being kind of [00:11:33] offering some kind of services introductions or being really strong in [00:11:36] one specific vertical, they then hope to improve the [00:11:39] chances of that bet to work out.
Toni: ~That's, ~that's the other [00:11:42] twist, at least that I heard you say there.
Raul: Yeah. And that's [00:11:45] exactly what I meant. So it is very much a VC view that is [00:11:48] at the forefront here. ~Um, ~it is less of [00:11:51] a, how can we position ourselves to make companies [00:11:54] choose us? I do think that there is enough arrogance within [00:11:57] VCs as well, that they don't necessarily think that way. Although obviously they're [00:12:00] cognizant of that.
Raul: ~Um, ~and especially VCs are becoming more and more [00:12:03] cognizant of also brand building and how they can do that and [00:12:06] kind of establish themselves in an ecosphere, [00:12:09] typically a regional ecosphere. But, ~um, ~it's more from their [00:12:12] point of view where they're like, Hey, ~they're very simple, ~look me as a [00:12:15] person or me as a fund, whatever, I'm good at these three things.[00:12:18]
Raul: I hope that I can find companies that need [00:12:21] these three things and that I can have a connection with so that I can [00:12:24] help them with those, ~uh, ~over other companies that don't have these [00:12:27] three problems. So I can't help them as much. It's a very logical [00:12:30] thing. ~It's just that this wasn't such, uh, kind of, uh, uh, uh, uh, uh, front of the, the, the, the lobes kind of, uh, uh, things.~
Raul: ~Um, ~but you said a very interesting thing there, which is. [00:12:33] So maybe without going too deep here. ~Um, ~I love that you were [00:12:36] talking about the arrogance of founders. ~Uh, and, ~and, ~uh, ~I, I agree [00:12:39] with that. There's also probably a very healthy dose of [00:12:42] arrogance that you kind of need to be able to be a founder, ~um, or, ~or make [00:12:45] that jump in the first place.
Raul: But, ~um, ~I do think [00:12:48] that VCs are, or at least I had to learn that at [00:12:51] Project A, ~uh, ~quite good at dealing with that, ~uh, and, ~and [00:12:54] kind of like quite experienced, at least not everyone is as good, but they [00:12:57] have a lot of experience at dealing with that. So it's not like they're going to be [00:13:00] overwhelmed with a very cocky founder.
Raul: And, ~um, ~[00:13:03] there's still ways that ~you can, ~you can make a very cocky, [00:13:06] arrogant, ~uh, ~resistant to consulting founder, kind of [00:13:09] take consulting advice. Thanks. And, ~um, ~there's kind of some [00:13:12] hacks. So obviously, for example, ~uh, ~from the view of a [00:13:15] VC, the communication is always like, yes, Toni, of course you're Jesus ~in, in, uh, in, in, ~[00:13:18] in a VC uniform or in a startup uniform.
Raul: And [00:13:21] yes, everything you say is correct and all that stuff. So nothing we [00:13:24] would ever be able to tell you would be wiser than anything you [00:13:27] know, so you have to obviously like. Really worship the [00:13:30] founder as much as possible. So their ego is kind of [00:13:33] caressed, and then they're very much more open [00:13:36] to taking some suggestions, especially if you package those [00:13:39] suggestions as in not as in like knowledge that you bring over [00:13:42] them, but things that are very non offensive.
Raul: And [00:13:45] so the example you gave, I love that one because that is so non [00:13:48] offensive to a founder's ego. Like, Hey, if you work with us, you [00:13:51] can, you can get better price for GPUs. Like every founder will be [00:13:54] like, this is a great VC and their ego will not be [00:13:57] attacked. ~Uh, ~obviously, funnily enough, all the founders think that they're [00:14:00] not very ego driven, but they're typically are.
Raul: So every founder thinks they [00:14:03] have like a bottom 10 percent ego, but they're all kind [00:14:06] of the same, obviously. ~Um, ~so. ~Uh, ~but that would [00:14:09] be very attractive to them or something like, Hey, look, we [00:14:12] have this huge network of, ~um, ~candidates, right? [00:14:15] So it's not that they're in any kind of way. We're suggesting that we [00:14:18] know better or we are better or whatever.
Raul: We just happen to know a lot of [00:14:21] people, and that's a boon to use, right? So that's benefit to you, [00:14:24] and I think that this is the way that VCs a lot of times have to position [00:14:27] themselves. ~Um, ~is to be as much as [00:14:30] possible caressing the ego ~of the, of the, ~of the founder and being non [00:14:33] threatening there while still offering those values.[00:14:36]
Toni: Yeah. ~I'm, I'm kind of, I think kind of ~moving on maybe ~kind of ~to the other lack of the [00:14:39] conversation. Which really is, ~um, ~have [00:14:42] VCs gotten more picky in [00:14:45] terms of the deals ~they, ~they choose to invest in, the bets they're [00:14:48] making? Simply because of a [00:14:51] shift in the market, a change in their business model [00:14:54] and them growing a little bit more conservative.
Toni: Do you [00:14:57] think there's anything to that notion at all?
The Importance of Personal Fit
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Raul: Yeah, I'm [00:15:00] curious because you said something earlier also in the discussion here, [00:15:03] but one thing that I'm really seeing is becoming more and more important [00:15:06] is we were talking about the arrogance of [00:15:09] founders and kind of caressing their egos and all that stuff ~or stroking their egos. But, um, ~[00:15:12] to some extent VCs are more and more also [00:15:15] trying to avoid these kinds of founders [00:15:18] or having a bit more focus on personal fit [00:15:21] and kind of a, can I actually work with this [00:15:24] person also personally?
Raul: And do I see myself working with this [00:15:27] person sitting in ~sweaty boardrooms for, uh, or virtual ~sweaty boardrooms? For the next five to [00:15:30] six years, and that is becoming a bit more important than earlier. So the [00:15:33] focus is going away a little bit from just the company [00:15:36] to also can I work with this person? Would you agree with [00:15:39] that?
Toni: Yeah, maybe. And I think this is, to be honest, kind of ~when, ~[00:15:42] when I talk to VCs that don't have a great [00:15:45] brand, ~um, you know, kind of they, ~they always wonder why ~would, why, you know, ~if they are [00:15:48] competing offers on the table. ~Um, why would, ~why would you pick [00:15:51] us, right? Kind of, they always think that, ~um, ~and ~then, ~then I tell [00:15:54] them that, ~um, ~and this is frankly ~my, ~my honest opinion, ~you know, ~as of [00:15:57] this point.
Toni: Is that, ~um, ~I'm starting to not really [00:16:00] care about this whole signaling for VCs anymore, [00:16:03] you know, signaling is like acting in a [00:16:06] specific way that is optimized for VCs to have FOMO [00:16:09] or to think like, oh, wow, this is such a great company. [00:16:12] And like, You know, I think all of that is [00:16:15] BS actually. And I think, ~um, ~trying to get tier [00:16:18] A brands on your, on your cap table.
Toni: [00:16:21] Sure. It's, I mean, if anyone gets ~an, it's ~a term sheet [00:16:24] from Sequoia and Andreessen versus, I don't know, Project A [00:16:27] or something, I'm sure they're going to go with the, you [00:16:30] know, Sequoia or Andreessen, right. But, but let's just, let's just be [00:16:33] honest, you know, usually that doesn't happen. ~Um, ~but, but most [00:16:36] importantly, and this is where I'm starting to go.
Toni: It's [00:16:39] actually. ~Um, you know, while you, ~you kind of need to live with those folks for [00:16:42] a really long time. And I think when I'm over indexing ~on, on, ~[00:16:45] on my, ~you know, ~new learned approach to VCs is actually [00:16:48] so specific. The people in VCs [00:16:51] is to try and spend a little bit more personal time [00:16:54] with them before signing everything.
Toni: ~Um, ~and this can be between [00:16:57] term sheet and really kind of signing all the different paperwork. ~Um, and, ~and [00:17:00] the reason why ~I'm, ~I'm kind of thinking about ~this and ~this is, ~you know, ~you know, I have this [00:17:03] experience with Growblocks and it was good. I mean, it was not [00:17:06] great, but it was good. My experience I had with the VCs there, [00:17:09] but ~the, the, ~the reality is that.
Toni: ~Um, ~as long as the sun is [00:17:12] shining, everyone is going to be your friend. Like [00:17:15] everything is going to be fine. ~Um, but, ~but once there's some rain [00:17:18] clouds and once it's raining and once it's starting to pour [00:17:21] all down, ~you know, I think, ~I think people in general, not just venture [00:17:24] capitals, but people in general are starting to show a little bit Who they [00:17:27] really are.
Toni: And then in that point, you really want to [00:17:30] make sure you have the right person sitting on the table. And then it [00:17:33] doesn't really matter whether they're there, the [00:17:36] Patagonia shirt says Sequoia or, you know, X, Y, and Z, [00:17:39] right? ~It doesn't actually,~ at that point, it doesn't matter. ~Um, and, um, uh, ~and I think this is [00:17:42] at least from the founder perspective, I think where [00:17:45] people should be a little bit more picky about it.
Toni: And you're saying kind [00:17:48] of from the VC perspective as well. I think one other [00:17:51] thing that I've seen in terms of pickiness is that Is going more in a [00:17:54] direction of, ~um, ~and again, it's both [00:17:57] founders and VCs is, Hey, you know, [00:18:00] what's actually this money that we're getting here? ~Um, it's actually not play money.~
Toni: [00:18:03] It's actual real money that we took from someone to give it [00:18:06] to you. And the idea is ~that ~that actual [00:18:09] real money that we're giving you, you return it to us with [00:18:12] a plus, ~um, ~whether or not that's a ~massive. You know, ~massive plus or small [00:18:15] plus, you know what we have our preference, but the [00:18:18] mindset should be, you give us that fricking money back ~with, with, ~with a [00:18:21] profit, please.
Toni: ~Um, ~and I think this is starting to [00:18:24] sink in a little bit more ~in, in, ~in the industry, both ~on the, ~on [00:18:27] the VC side, but also ~on the, um, ~on the founder side where [00:18:30] people are on the founder side, I believe. [00:18:33] I'm more thinking about building an actual business, [00:18:36] like an actual business that actually works. ~Um, ~[00:18:39] folks are starting to think a little bit more about [00:18:42] what is the capital that is required for this business to [00:18:45] work out, right?
Toni: And do I need to get [00:18:48] 50 to 100 million in venture capital to make this a big company [00:18:51] or, ~you know, you know, ~is there a different path in order to [00:18:54] achieve that? And most importantly, [00:18:57] once you're at the point where you have an actual business, ~you know, ~[00:19:00] let's just say 5 million in revenue or, ~you know, ~3 million in revenue or [00:19:03] something like this, is [00:19:06] capital actually what's holding you back from making this 100 [00:19:09] million dollar business?
Toni: Because in many cases, It [00:19:12] might actually not be what's holding you back. Right. And [00:19:15] then raising funds is only going [00:19:18] to create a lot of grief around the cap table. ~Um, and, ~and [00:19:21] less so, ~you know, ~any business value. And I think [00:19:24] both VCs and founders are starting to [00:19:27] be a bit more conscious about that stuff, at least ~from, ~from what [00:19:30] I'm sensing and from ~what I'm ~what I'm gathering, even from more [00:19:33] junior,.
Toni: You know,~ kind of, ~I call them the SDR [00:19:36] VCs, ~uh, ~that are taking the first couple of calls, I think they're [00:19:39] starting to be a little bit more, ~uh, ~not just [00:19:42] only looking for roping in another deal and getting a pat on [00:19:45] the shoulder. But ~I ~actually ~kind of from, uh, from ~looking for real businesses there.
Raul: ~You know, funny, ~do you know [00:19:48] this meme, ~um, ~if these people could read, they would be very [00:19:51] offended. ~Um, there, there, there's, there's kind of a meme, uh, that makes kind of fun of a certain group of people, whatever it is. It's a bit offensive to a certain amount of people, but, um, what you just said there, uh, my, my thinking immediately went to, ~if a junior investment managers knew what [00:19:54] an SDR was, they'd be very offended at your comment. [00:19:57] Um, so ~which, which kind of goes into that, uh, but like, like, let's not be too offensive here. Just a little bit. Um, I, I was going to go into that as well. And, uh, so,~ so [00:20:00] part of the reason ~that, ~that VCs are maybe becoming a bit [00:20:03] more, ~I don't know, ~thoughtful about their offer is that [00:20:06] money itself is just not as hyped [00:20:09] anymore as it used to be.
Raul: Like it's still very, very important. But there [00:20:12] is also, and I know of a particular [00:20:15] VC that is kind of pissed about that even, ~um, ~there's kind of this [00:20:18] counter wave as well of, hey, don't [00:20:21] take VC money. Only if you really need to, like, like, [00:20:24] don't, do not take VC money. ~Uh, ~let's bootstrap everything. And [00:20:27] obviously there are some very famous ones like the Adam Robinsons of the [00:20:30] world and everything, ~uh, ~screaming that out at the top of their lungs on LinkedIn and [00:20:33] everything.
Raul: ~But, um, ~These voices are becoming larger and larger and VCs are [00:20:36] not super happy about that kind of thing. ~Uh, ~and I know [00:20:39] one ~that is, um, very, ~that goes into a lot of rants about that. ~And ~I do think ~that ~there's ~come ~[00:20:42] probably a middle ground ~in between. ~What I do like about that is that the focus is [00:20:45] becoming more and more just building good companies [00:20:48] and, ~uh, ~less the goal of, ~you know, itself of, uh, ~raising money, [00:20:51] which ~I mean, ~let's be fair here.
Raul: Like the postulating [00:20:54] that is happening, obviously out there, ~um, ~with rounds that are [00:20:57] being, ~uh, ~raised and maybe some exits that are happening [00:21:00] is, ~was ~always too big anyways, compared to [00:21:03] like, what does that really mean for the individual? ~Like, uh, ~I know stories of founders ~with, ~[00:21:06] who have exited three companies, but are still kind of living paycheck to [00:21:09] paycheck, ~um, ~because of, ~uh, ~all that comes in between.
Raul: [00:21:12] The kind of big amount of money that they sold the company for. And ~then ~the [00:21:15] cash that they make at the end of the day. So I think that there's a little bit more [00:21:18] skepticism about just like raising money and ~like ~creating big [00:21:21] sums to post on LinkedIn. And what does that actually mean [00:21:24] for me as a founder?
Toni: Yeah. And I think [00:21:27] actually, I wouldn't say it's skepticism. I would, I would [00:21:30] call, you know, there's obviously lots of LinkedIn content on the, you know, [00:21:33] bootstrapping site, but let's just face it. There's so many business [00:21:36] models out there. It's really difficult to bootstrap your way [00:21:39] into this and bootstrapping usually means [00:21:42] being able to afford not paying yourself or your [00:21:45] small team, any salary.
Toni: ~And. ~In order to do that, [00:21:48] you yourself and your small team ~need to be able to, you know, ~need to [00:21:51] be able to finance your lives without a salary. And not everyone can [00:21:54] do that, right? So, so I think there's, there's a little bit of kind of a [00:21:57] different kind of path here. But what I am seeing, [00:22:00] though, is that, ~um, ~Let's just get a little bit more thoughtful [00:22:03] for what you need, what kind of capital.
Toni: ~And, you know, I would say like, ~Hey, when you can [00:22:06] fund something from customer capital, then rather do that [00:22:09] versus venture capital. I think that makes total sense, but [00:22:12] also, ~you know, ~especially if you're ~like in a, ~in a hyper, [00:22:15] Cycle, ~um, ~area like ~an ~AI or whatever it might be ~up, you know, when you're listening to this, you know, ~having [00:22:18] venture capital is going to help you ~to ~accelerate things, accelerate [00:22:21] growth, catch up with your competitors, ~you know, ~gain market share and so [00:22:24] forth.
Toni: ~Um, ~but I think what's really important is there needs to [00:22:27] be consensus around the founder team, that [00:22:30] capital is actually what's holding you back, that kind of not [00:22:33] having more money on the bank account is the reason why you cannot [00:22:36] progress further. ~And I think. ~Many, many times, the reason why [00:22:39] people have been, ~you know, ~going out fundraising is because they needed [00:22:42] cash, ~um, ~and not because they saw that as an accelerator, right?
Toni: ~And, and I think, and ~
Advice for Founders
---
Toni: I [00:22:45] think ~that ~that part ~is, ~is growing up from both [00:22:48] sides, ~actually. ~So, ~I mean, kind of ~just summing up what we ~kind of ~chatted about, right? I think [00:22:51] number one. There has been a bit of a lull in [00:22:54] terms of IPOs, in terms of bigger acquisitions, [00:22:57] which is hitting the VCs probably hardest as an [00:23:00] industry.
Toni: I would say because of that, [00:23:03] there's a little bit of. ~You know, ~pressure to change for those [00:23:06] organizations. ~Some of that is coming from, um, you know, uh, ~some of that is resulting in those VCs [00:23:09] becoming a little bit more picky in terms of which teams they [00:23:12] choose to work with from a VC founder [00:23:15] fit or VC vertical fit.
Toni: I would ~say, I would also ~say [00:23:18] VCs are becoming more picky in terms of what is [00:23:21] real business, what is not. And then [00:23:24] ultimately, ~you know, ~they are, ~um, ~more and more thinking about, well, ~Since there, ~since we [00:23:27] all agree, there are fewer viable deals out there, [00:23:30] how can we differentiate and then more and more going into [00:23:33] this operating VC direction, [00:23:36] which should obviously help also increase the chances of those [00:23:39] few viable deals.
Toni: Investments actually kind of bearing fruit [00:23:42] and fruits and working out. I think this is kind of [00:23:45] the twist that we're seeing there. ~And, um, ~and I think this is super [00:23:48] worthwhile for people ~to, um, ~to be aware of next time they're going out [00:23:51] fundraising, if they do go out fundraising, ~um, and, um, ~and take some of that advice [00:23:54] with them.
Raul: To finish with that kind of advice [00:23:57] as someone who is currently trying [00:24:00] to raise some money. ~Um, ~what does that mean for a founder, Tony? [00:24:03] So do you need to change anything compared [00:24:06] to maybe three, four years ago? And, ~um, ~how do you [00:24:09] react to these developments? Let's say you are aware of them. ~Um,~
Toni: Yeah. [00:24:12] I think I frankly, don't give a shit who [00:24:15] is, has an operating arm. I actually really don't care about [00:24:18] that. ~I think, ~I think VCs are great for. [00:24:21] Giving you understanding of how the market works in terms of, [00:24:24] you know, how you need to look like in order to raise an [00:24:27] additional round if you need it. ~Um, ~they're great for that, right?
Toni: [00:24:30] Six months ahead of time. They can tell you, ah, with those metrics, [00:24:33] Tony, probably you're just going to get a six, seven, [00:24:36] whatever acts and you're probably only going to get, you know, raise [00:24:39] this. ~Um, ~I think what they're pretty poor at is the whole [00:24:42] operating side. So that's why people hire folks like [00:24:45] yourself, by the way.
Toni: But it's like, it wouldn't be my first goal ~to, ~[00:24:48] to do this. Right. So I kind of don't care about this at all. ~Um, ~and then ~number, uh, ~[00:24:51] number two, ~what, ~what else it means is I [00:24:54] think the. ~Uh, ~bravado of all the [00:24:57] hopes and dreams of how the business is going to take off and kind of be all [00:25:00] visionary and so forth.
Toni: I think you as a founder need [00:25:03] to tune this down a little bit and, ~you know, ~focus a [00:25:06] little bit more on, ~um, you know, ~what are the proof points that we're having [00:25:09] right now that are actually making this a sound [00:25:12] business, like, ~you know, what, ~what increases the odds or ~the. Uh, ~[00:25:15] the confidence of the conviction on the other side, that [00:25:18] this is a company that has a real shot of making it [00:25:21] beyond just the vision and the long shot and the [00:25:24] moonshot and thinking big and all of that jazz.
Toni: I think, ~uh, ~the [00:25:27] advice is to be a bit more real, ~um, ~[00:25:30] about the prospects of the business and, ~um, you know, ~making sure that this is [00:25:33] understood on the other side, obviously [00:25:36] still talking about where this thing can go. Right. But being just [00:25:39] more clear, more realistic. ~Uh, ~more so aware of [00:25:42] the challenges and then the last thing I would [00:25:45] say is, ~um, and this might be terrible advice folks, so maybe don't take it, but, but, um, ~also clearly [00:25:48] pointing out where the flaws are in the business [00:25:51] still, ~um, you know, ~still saying like, you know, what, ~uh, ~the two things [00:25:54] I am most worried about as a founder is A and [00:25:57] B.
Toni: ~Uh, ~and it can be that it's like, Hey, you know, [00:26:00] yes, we're growing really nicely. You know, some of those channels are [00:26:03] working. I'm worried about how much further we can scale [00:26:06] channel a and whether or not we're going to find a really [00:26:09] scalable channel B, right? Those things, you know, if [00:26:12] you say this at series C or F or [00:26:15] whatever, that's not a great thing to say.
Toni: You should be saying other things at that [00:26:18] point. But if you're saying that around Seed or [00:26:21] A. ~I think, ~I think that will actually give you points [00:26:24] on the other side, and there might be some other things you're worried about. ~Um, ~[00:26:27] and I think, you know, pointing these things out, ~uh, ~[00:26:30] currently make you rather [00:26:33] mature, ~rather a person that.~
Toni: ~Uh, ~they want to do business with sit in a boardroom [00:26:36] with, ~um, ~instead of just, ~uh, you know, being, ~being the bravado [00:26:39] person ~and, and, ~and posturing ~and, and, and, ~and acting like maybe the Jesus that he [00:26:42] would kind of mentioning earlier. I think that helps, [00:26:45] right. At least from my perspective.
Raul: Yeah, let's leave it at [00:26:48] that. ~Uh, just as a further idea, uh, ~
Conclusion and Wrap-Up
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Raul: I think what's important is also where you're [00:26:51] listening to this. And, ~uh, ~there is some differences between European [00:26:54] and US VCs, I think, especially with kind of how do you [00:26:57] have to sell yourself and how hard do you have to go on that as well. [00:27:00] So maybe that's a future episode.
Raul: Other than that, ~uh, ~this [00:27:03] was really interesting to me as well. ~Uh, ~I was really curious about your thoughts on ~some, ~[00:27:06] some things here. ~Um, ~let's wrap it up here. ~Uh, ~we [00:27:09] have a lot of input, I think, for someone who's looking for funding right [00:27:12] now. ~Um, ~I would be really curious as to some, ~uh, ~things [00:27:15] that maybe you've seen out there, ~uh, ~if you listened to this episode.
Raul: ~Uh, ~other than [00:27:18] that, if you're interested, ~Uh, to, to hear more from us, uh, ~please subscribe. ~Uh, ~we're trying to grow this [00:27:21] channel, ~uh, ~spread the love, share. We're really gonna [00:27:24] have ~a ~big things coming in 2025 and just follow [00:27:27] us wherever you can. So you see when the new ~episode ~episodes come out.
Toni: [00:27:30] Wonderful Raul. Thank you very much for the episode [00:27:33] and everyone else. Thanks for listening. Have a good one. Bye bye.