Note: Here’s a brief recap of a recent discussion I had with noted VC and friend, Eric Paley. He and the other partners at Founder Collective pursue a “First Check-in” approach to investments that’ll be interesting and perhaps valuable to listeners. The “Lessons from a Startup Life” Podcast is available on Amazon Music, Apple Podcasts, Deezer, Spotify, Turn-In + Alexa and other leading podcast streaming services.
Eric is a general partner at Founder Collective, a seed-stage VC firm. He led Founder Collective's seed investments in several successful startups, including Uber (NYSE: UBER), The TradeDesk (Nasdaq: TTD), Airtable, Whoop, Cruise Automation, HotelTonight, Formlabs, and Omada Health.
Previously, Eric was twice an operator before becoming a VC. He co-founded Brontes Technologies – a 3D imaging company spun out of MIT – which was acquired by 3M.
At Founder Collective, the firm’s overall approach is to be the ‘first check-in’ prior to or in Series A. Eric describes it as a “software driven” fund and sees AI as the next step of software eating the world. In terms of investment decisions, they are of course underpinned by a solid understanding the business. Ultimately, investment decisions are heavily influenced by the partners’ assessments of their prospective portfolio companies’ founder or founders. It’s an interesting, purposely “person driven” decision process.
During the course of the podcast Eric observed:
VCs get the vision part wrong – they get very excited about “high concept” startups rather than businesses that are based on “some core insight into an industry … doing something differently”. Financing there is based on the right amount of capital to get you to next stage. Recognize that discipline is important.
Evaluate founders based on how they talk about their business.
VCs should not decide on equity splits. “It should be as thoughtful as everything else in your business.”
He is a firm believer in “sweat equity”.
Lean Startup concepts are a “recipe for building value into a startup.” People have lost the Lean Startup message in the last five years. “Confidence – not capital – should be the currency of acceleration.”
“Most of AI will be ultimately open sourced. Application and user experience will matter.”
OpenAI – everyone now knows where they can go from here.
Microsoft’s leadership in AI with ChatGPT – how long will this last?
“Our industry has done a terrible job” on diversity and inclusion. If you do diversity and inclusion early, the business becomes a much more inviting place.
Remote work: “people should be thoughtful”.
“The whole point is the startup is a learning machine.”
“We are in the beginning of a correction…”
And many more comments…
Eric divides his days between:
Seeking out new opportunities, meeting with companies and founders, and doing due diligence.
Spending lots of time with founders talking with them about their businesses, and making introductions and networking first-time CEOs.
Checking off the requisite internal, firm-related activities.
Networking for portco’s and the firm
Pursuing educational engagements with portco’s and the community
Tune-in and hear more. Enjoy!
Eric Paley - the First Check-In