The Full Ratchet (TFR): Venture Capital and Startup Investing Demystified

Leo Polovets of Susa Ventures joins Nick to discuss Raising Fund III, A Framework to De-risk Your Startup, & When to Explore vs. Exploit. In this episode, we cover:

  • Give us an update on your investments at Susa since we last chatted?
  • How has the thesis at Susa evolved over the past couple of years?
  • Do each of the GPs at Susa have specialty areas of focus?
  • This year Susa closed on 2 new funds - Susa III a $90M early stage fund, along with your first opportunity fund to which investors committed $50M. What was the elevator pitch to LPs and what worked well in the first two funds that resonated with LPs, leading to the successful raise?
  • What would you have done differently in Fund I and Fund II if you could go back?
  • What it takes to raise a Series A... often founders will have a singular focus on the vanity metrics -- they assume if they hit $2M in ARR they'll attract the A round at an attractive multiple from Tier 1 investors. But, we've seen this play out and it's not all that's required. Why is a singular focus on ARR a poor approach to raising money?
  • Leo, you have an original framework here focused on de-risking the the major risks centers facing a startup. What are the high-level principles?
  • The 9 risk centers that you've identified include Product Market Fit, Product Quality, Team, Recruiting, Sales, Market, Funding, Short-term Competition, and Long-term Competition -- can you pick one of these areas and walk us through an example?
  • What are the common mistakes founding teams make with regard to these risks?
  • Talk a bit about the balance between testing and execution? 
  • How should founders balance figuring out the best path forward with running fast in the direction they think is best?
  • Increasingly our founders have been sending us dealflow, operating as scouts, making angel investments in early stage companies. Where do you stand on this -- distraction that should be avoided or net benefit to those involved?
  • In what ways have you changed most as an investor since the early days?
  • One piece of advice for founders -- what is it?


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