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

Sarah Tavel of Benchmark joins Nick on a special Crisis Coverage installment to discuss Consumer Marketplace Investing; Why Aggregate GMV is a Red Herring; and Minimum Viable Happiness as the Key to Market Leadership. In this episode, we cover:

  • Background and path to venture?
  • Quick overview of the thesis and your focus at Benchmark
  • What are your thoughts on platform VC?
  • What tactics or approaches do you use in the process of “scaling your founder”?
  • You sit on the board of some companies, such as HipCamp, that have been greatly affected by the pandemic -- What are some of the creative responses you've seen from portfolio companies?
  • Is there anything fundamental to Marketplace businesses that you think will shift as a result of the crisis and changes in consumer behavior?
  • In the food delivery space, we recently witnessed DoorDash unseating the larger incumbent: GrubHub, with the greatest market share. DoorDash started after PostMates and years after Grubhub... how'd they do it?
  • Do you currently see or do you predict more situations where a startup capturing more supply will lead to displacement of a large tech company as mkt share leader?... if so, in what markets?
  • Recently, you published a series of newsletters talking about the hierarchy of marketplaces... first off, what are the three phases that you've outlined here?
  • Why is a push to aggregate GMV across many markets, less important than dominance in one market?
  • What is Minimum Viable Liquidity?
  • How do you define/measure happiness?
  • At what levels do you know you've reached MVL or MVH?
  • Level 2 of your Marketplace framework... Can you talk about what it means for a marketplace to “tip” and how do marketplace based businesses achieve this?
  • Is there something specific that happens w/ the metrics of a businesses that show that the marketplace is tipping?
  • Do different stages of fundraising map to these phases?
  • The third phase you refer to is the 'Outrun' phase... walk us through the main focus areas in this phase.
  • Homogeneity of the buy-side as a negative... can you expand on this?
  • How does your evaluation of a marketplace based business differ whether it’s a b2b company or a b2c company, if at all?
  • Let's say you are approached to invest in a Consumer Marketplace company with $10M in GMV, a 25% take rate, and 20% MoM growth for the last 6 months.
    • Catch is you can only ask for 3 data points to make your decision.
    • What 3 questions do you ask for?

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