I'm Kent Lindström, co-founder of 8bit Capital, a Silicon Valley venture capital firm that invests in the software startups of the future. We focus on AI, cyber security, and fintech. I'm going to take you behind the scenes in Silicon Valley. This is the Something Ventured podcast.
All right, welcome back. This is the Something Venture Podcast. I am Kent Lindström. I am your host. My guest today, David Tisch. How are you doing?
I'm doing great. How about you, Kent?
Good. Thanks so much for doing this. I got a little New York thing up here. Up here for you.
Thank you. You swapped that. No.
For your Okay. I am far less clever. Far less clever. You might imagine.
I changed my bears around for whichever founder I'm talking.
See, that's pretty nice. So, David's a VC, but but hang on. This is This is This is going to be interesting. Bear with me for a second here. Explain something about venture capital to you. If you if you go to the website of a venture capitalist and you see one or two famous companies on that website, those are the one or two famous companies, call it two famous companies that that VC has ever invested in. There's not like another famous company they just forgot to put on their website, right? And so if you go to most VC websites, we're talking about seed VCs, you'll see maybe one or two famous companies. And by the way, that's great. Like in this business, again, seed investing, that's more than most people have. If you see one or two companies, that's pretty impressive. David has invested in RAMP and Plaid. That's two companies, right? That's pretty good. Except he also invested in ID.me, Boxy, Stripe, Base 10, Air Table, Warby Parker, Clay, Zipline, and wait for it, Cursor, which just got acquired for $66 billion, which there might be bigger acquisitions in tech. I don't really know what they are. You're having a pretty good career.
Just day by day, I think it probably just means I'm old.
Oh, what do you like? You're like Bulld just play the play it one day. No, look, it's a I think I think venture capital, as you said, is a business of finding outliers. And I think in our approach to to what we do at Box Group, we're waking up every day trying to find people that are going to build companies that become great. It is not there's no predictability in it. And I think that that's the uniqueness of being an early stage or seed VC. is you're meeting people before any of these words matter, any of these names matter. and you're getting to watch the the journey from the very beginning. And it's a privilege to do it with the ones that work and become household names, but it's equally a privilege to do it with the ones that are are trying hard and don't work. It's it's the job and I think it's like one of the coolest jobs out there.
How did you come to the job in the first place? I mean, you're in New York, you're you know, you're a Tisch. That's kind of an auspicious name in New York. It seems like you could be an investment banker or a hedge fund guy or private equity is pretty hot right now, right? That's that's pretty good.
Um you're old, too. So, I I grew up You're you and I are both old but different. old. And I grew up watching the internet start. and I fell in love with it as a kid. And I I think finding your way to a career on the internet in you know early 2000s is very different than doing it today. I think today it's taught in schools. You're sort of taught about entrepreneurship. You're taught about the startups. You're the word venture capital is known. There are podcasts. There are blogs. There's access to this industry. if I go back to sort of 2005, six, seven as I was finding my way here, this was an industry for rebels. It was not something that was accessible. It was not something that was known. you know, Fred Wilson was blogging like Bradfeld was blogging. There was some early access to it and learning, but it was it was the early days and I've been doing this for a long time.
What do you make of that? There's I've been trying to explain this to people. There's a group of people, you're younger than me, but I think you might still have caught this thing where you existed in a world before the internet. Like, hey, it's summer. Like, I would go like, well, I guess I got to get a pile of books to read and if I want to meet a girl, I'm have to go to a party and drink some beer and meet a like. And then so so when and part of why I'm doing what I do now investing in amazing tech companies is that when the internet came out and we're talking like beep beep bloop modem stuff it was cool. It was like this is just this is nuts. Like this did not exist and now this exists and this is amazing in contrast to somebody days maybe like me I've had an iPad since I was two and the Wi-Fi sucks you know on my airplane.
Yeah. I so so if you ask AI to explain this it's it's pretty fascinating. There's a generation it's called the Xennials. It's sort of in between Gen X and Millennials. it's 1978 to 1983. I'm born in 81. Zuckerberg for context is 83. So he's right at the other at the end of this. And what it explains is our our childhood. We this 5-year micro generation experienced the switch mainly from analog to digital and we lived it. We lived it in the sense of I had a 14 I had a 2400 baud modem. I like when it got to 144 it was like a miracle. I was on AOL, Prodigy, CompuServe. I saw the web start. You you got to see these websites launch. So, eBay was a core part of my childhood. you know, I was early user of just about everything that became big companies. Amazon would advertise on our like sports radio station for the biggest the the advertisement was a bookstore the size of a football field. and that was Amazon. And and you fast forward to now, and these are all ingrained in the sort of global society. I think that history, that context of where we were to where we are now is a helpful framework for thinking about where things could go. But I think the more you try to assume the world goes back in any way or that the patterns of each moment will repeat themselves, I think it's a huge mistake. I think for me, you know, investing is an example. when I started investing, if you had said, you know, a business can get to a billion dollar valuation or a 10 billion valuation, these numbers were like unrealistic. And today
in the public markets, the big tech companies are worth multiple trillion dollars.
These are companies that were worth, you know, multiple hundreds of billions. These these are significant multiples on the biggest companies in the world. And so I think the key to sort of not losing sight of of what's coming next is not living in the past. And so I think those are like the my partners didn't have those same childhood experiences. My the founders we're funding didn't have those childhood experiences. So I can remember them fondly, but they're pretty irrelevant.
Yeah. I think people forget how small the like that that what the internet was like early on. There were like a couple hundred million people on it which was huge but it was a couple hundred million people and like these companies would get you as an investor you invest in something and it would get acquired you know for $250 million and it was an amazing like knockdown dragout outcome because there were 250 million but now you know there's 4 billion people and these companies actually generate cash flow in the tens of billions of dollars and are worth hundreds of billions of dollars. You just forget that the scale of the thing has just shifted so like kind of so dramatically.
Totally. And it's it's global and it penetrates everything, right? And so what started as you know the internet is now a totally different it's it's like a horizontal part of the world. It impacts every industry. the software and the hardware component of what technology has created. modernizes industries rapidly and then you layer on AI the the moment we're in right now and it's doing it faster, cheaper, and better than ever before. And so it's this compounding unlock of growth and opportunity that isn't distributed equally, that isn't accessible perfectly. but I think the magic sometimes is important to to appreciate, right? The like and and you alluded to like kids sort of defaulting to assuming, oh, like the idea of Wi-Fi is pretty magical. The idea of like base AI is magical. the idea of like accessible AI in your hand while traveling the world or Starlink like these are magical things and I think you know the the dream is important to to remember and when founders start something they're made up ideas they're they're creations and I think watching those dreams come true is a you know unique lens to see where the world's gone.
Yeah. Although I do think find it kind of amusing the number of venture capitalists who get access to AI and then use it to book hotels which wasn't you know I didn't have that trouble booking hotels before actually hotel things seemed clickable pretty good at it online. What do you make of the sort of messiness of seed investing where you it's unlike other stages? You know, I had Hunter and Sachan from Homebrew and they kind of talked about this where they were like, you know, we were pretty famous beyond what we had achieved in terms of investments like 5 years in like still we didn't know what was going to happen. Now, it ended up they invested in Shield AI and Chime and they did great, but it's just such a messy path compared to, you know, investing in the series D of or N of SpaceX and taking your multiple.
Yeah. I I think for me it's important to remember that we're lucky in that we have a portfolio and that we're in very many ways a commodity. We're providing capital and some version of service to the customer who is a founder who is living fully in their dream. And so, you can abstract these stories of messiness, these timelines, these, you know, highlights, but inside of each of those stories is a human who is going through way more emotionally, physically, psychologically than the investor. And the investor gets to come on podcasts and talk gloriously about the the great stories. But if it doesn't work, that is normally someone's who's been very successful in their life, maybe never failed. That was their dream. They set out to do it and it didn't work. And the actual toll of that I think gets erased in having a portfolio in talking about the winners. so I think for us it's it's incredibly important to stay aware of where your role is in a business that is investing in someone else's business. but the timelines in early stage venture are incredibly unrealistic. When you tell someone in any other job that like your results or your feedback loop is five, 10, 15 years, that's in a rational timeline. Most other businesses like in finance, most financial businesses public immediate. You know exactly when you go to bed at night how much money you have. In private equity, there's like a defined timeline to start stop that you are operating under. And then you go into late stage VC again really compressed timelines. And at early stage VC it's a totally unknown timeline. And in you know an operating company normally you have a job you have a task you have a project it's start to stop. When you are two people in a room trying to build a company from scratch it's just it's it's an infinite set of risk and opportunities that sit in front of you.
Yeah. Yeah. It it's interesting you always have empathy for for the founders which I don't know how many venture capitalists actually have but what do you where do you other than having that empathy which goes a long way where do you fall in the spectrum of kind of writing yourself into the story like you're really helpful to these guys you're like hey I'm just lucky they took my money and if they listen to me once every 10 times
I hope they don't listen to me if they need to listen to me. no we're we're like extras in a story. I think if you do a cast at the end of a startup journey, the majority of investors, if not all of them, should just be like extras. the 30th employee you hire, the hundredth employee you hire, if you're scaling, the thousandth, those people build and they make and they create and they're part of your culture and they're inspiring others to join. They're inspiring people to stay at your company. I don't believe investors make or break companies. I don't think they are like contributing factors to success. I think what they are are relationships for the founding team to rely on as the founding team wants to and as the investor is able to build trust and confidence in that founding team to be a phone call to be somebody they reach out to. I think the more you inject yourself into a narrative or the more that you are trying to force opinions onto a company, the lower the probability of success.
Yeah. Why do you think that's this is a weird thing in venture where people try to like you know they invest in some company it does great and then they're like and yeah and I was a big part of making it great which is any other area of maybe private equity but like if you like short the yen against the dollar and make $100 million you go I'm a genius you don't say and I also called the prime minister of Japan I told him to do this and it's all because you're like I made 100 million bucks I'm a genius it's
because it's a passive job and there's an ego that needs to be fulfilled and the only way to become active and fulfill the ego is to inject yourself as a contributing factor in a story that isn't yours. I I think it's pretty simple. It goes to like the the nature of humans that have ambition and expectations. And I think there the other side of it which is you know logical is people have jobs at venture firms and they have to use their investments to get promoted to succeed to grow to develop a brand to develop power inside of their firms. And then in terms of attracting a future founder, if you have attached yourself to the story of prior successes and you're sort of known as the the person, the investor of that company, I think that helps attract the next set of founders. But I think when you believe that you are the reason that something succeeded, that probably crosses the line to like delusional or wrong. Yeah.
Well, it doesn't back test very well either if you think of like I don't know did Travis Kalanick listen to anybody like Mark Zuckerberg structured his board such that you could not tell him what to do right like in fact it might be a good sign when you know when a founder is like yeah no thanks for the advice but I've got this.
Yeah I think unsolicited advice from VCs is is probably the least valuable thing. now look, I think there's a relationship to be built that if you're able to build it and a founder wants to talk to you, they're doing it because you've proven that their time is well well used by talking to you. And I think that is like awesome. But I think to sort of come in with the expectation and there are probably to to be clear there are probably five VCs out there maybe 10 that like you should listen to and that are outlier board members that have built something from the ground up or or been part of enough like if Mark Andre is telling me what to do or giving me advice I would pay a lot of attention. Now, it doesn't mean the entire firm and it doesn't mean the random new partner that joined last week, but I think at certain firms there are excellent either former operators or just luminary investors that have seen enough. I think Alfred at Sequoia is like worth listening to. I just don't think it is the 30th best VC firm, the third partner there is equal to, you know, the top 5% of VCs in the country or top 1%.
Yeah, that's a great point. There's two things that can happen. One one can be like, hey, I've I've I've seen so many things that I'm here to tell you that what you're doing is here's how it ends like 99 times out of 100. And then there's also like I'm part of the pack and I went to the conference and everyone's investing in physical AI. What's our physical you know whatever whatever I mean I've been on run companies where the board's been like literally whatever conference they just went to oh we got to get into you know whatever this is or that is and it's just a I don't sit on boards so it helps.
Yeah. Yeah. We we don't either. Well, I just I don't I don't want to I I don't I don't see in the best companies how that is a useful way to impact their success. I think you can do great work for on behalf of a founder from the outside. So, I prefer that.
Yeah, I think that's right. And at the seed stage, what are you going to do? Fire the CEO? Like, if you're doing that, you're you're screwed anyway. So, what Okay. See, so you're meeting people who are coming to you and saying, "I've got I'm going to change the world." Which is what's so great about this business because they're ridiculous.
Sometimes they do though.
It's that's Silicon Valley. Like you sit down with somebody who's like, "I'm going to, you know," and then cure cancer. And you're like,
"Maybe you will." As opposed to And then and then it happens sometimes. And it's like what a what a magical like thing to watch and be be like slightly attached to. It's like a incredible privilege.
And when so when you're sitting down when you're what are you looking for? You see the founder the the the thing hasn't happened yet. It's a person. They got a vision. Okay. You've only got what you got in terms of information. What do you and your partners kind of go?
We spend a lot of time on the why. Like why are you building this? Why are you the right person? Why is this interesting? Why can you do this? And like why why does this matter in 5, 10, 15 years? And I think when you start understanding the why, like the what is sort of obvious when you meet a company, they're going to explain to you what they're doing. They're going to explain to you like what they've built and what they're going to build. But that's not a vision and that's not going to play something out in in a complex world that feels like a very isolated set of facts. And to me, the why starts to attach the what into the world. And that is what we invest in. You're not giving rewards out. You're you're investing. And the investment, as we talked about, is a 5, 10, 15 year outlook on the world. And so you have to have a founder that can articulate where the world's going and why they are capable of navigating all those moving variables and creating something that's going to be important in that complex system. And I think you learn a lot by asking like why are you doing this? And you can ask it in an open-ended way such that you see are they like going to talk about the idea, the market, the product or are they going to talk about like the inner drive that forces them to take this risk in life and the experience they've had whatever those those factors are and I think that that is how we learn about people and that's what we invest in is people.
Is there anything you can do to figure out or to div somebody told me once I've kind of seen this in companies I built that the company management task changes like every three acts like three three people sitting around a table then there's nine people that's a little different 27 now you start to you know 100 people now there's an HR person 300 people okay you know is there anything you can do to take someone go I wonder if this person can manage 100 people.
We think about that a lot. because you have to sit in a room and sometimes it's zoom, sometimes it's a conference room and you're like are these two random people across from us capable of leading a hundred a thousand people? Like you you imagine the all hands are they standing up there and inspiring everybody? Are they able to recruit amazing people to join them? That is a huge factor. It is predicated on building something that's working and a business, a product that's working in order to get to that scale or raising enough money to get to that scale. But they have to like the biggest early sign to me is is like who have they brought around the the company? So who are the initial hires? you know, when we go to college campuses and meet students, you look for the student that is able to attract and recruit their smartest friends. If you are starting a company as a freshman, sophomore, senior, recent grad, are you hiring to work for you? Your three smartest friends at a great school? Why not? Like, are they not inspired by you? That's an interesting thing. And you see at campus, Cursor is a great example. They were able to attract a ton of the best students that they were in school with. we founded we funded a company called Mach out of school as well, MIT. and Ethan, you know, pitched us and he's like, I have 50 interns that are wanting to dropping out want to drop out of school to do this with me. Yeah, that's a good sign when you get to a, you know, more senior person in their career starting a company. Are they putting the band back together? Are they bringing people from, you know, Palantir? Are they bringing people from Anthropic, Open AI, from RAMP? To work with them? If not, why? So, are you not able to inspire the people that know you to join you? I think those are really early factors that you can look at to be like is is this person a magnet for great talent. I think you're also, you know, it matters again the archetype of the founder, but you have to imagine growth. So you can't assume that the 18, 20-year-old founder is a static object. They're going to have to mature into leading people way older than they than they are and people that are young and ambitious and unmanageable and everything in between. and you know when you meet a young person with bright eyes and big dreams it it is going to take maturity along the way to figure out what style of leader they can become.
