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

James Currier of NFX joins Nick on a special Crisis Coverage installment to discuss Network Effects; 9 Days Until a Funding Decision; Software as the Foundation for the Modern VC firm; and the Future of Social Media. In this episode, we cover:

  • Background and path to venture
  • Thesis: Overview of the thesis and your specific focus at the firm
  • Pandemic: Unique outcomes or behaviors you are observing as a result of the pandemic?
  • Overview of Software: You're a huge inspiration to me...  I love that you're bringing innovation to venture -- building software and tools that help founders and allow them to access more investors. For those in the audience that don't know, can you give a brief over of the major software and tolls that you've built.
  • FAST Program: You launched the FAST Seed Financing Program ($1M, $1.5M or $2M for 15% of their company) which ran April 16-May 22.... were you allowed startups to apply for funding and you committed to responding in 9 days. Why'd you launch the program?
  • What did you learn that was surprising?
  • Will you do it again and, if so, what will you change?
  • All this software focus could run the risk of investing in startups that look great on paper but could underestimate or not fully assess the founding team's mindset.  How do you consider the qualitative?
  • Creators vs. Opportunists: How do you insure that the founder's you are backing on true creators with the right motivation instead of just opportunists with great skill addressing large markets?
  • Unusual vs. Conventional thinking: You have said that exceptional outcomes are the result of unusual thinking and that conventional thinking is the death of many companies -- explain what you mean by these types of thinking?
  • 1st time vs. 2nd time founders: What's the biggest challenge to working with second time founders?
  • Social: One of your key observations was that social media is becoming less social and more media. What are some of the consequences of this shift?
  • It seems that social media is moving away from broadcasting towards intimacy and sharing. Does the pandemic accelerate any trends/behavior/psychology within in social?
  • Do you think business models and advertising as a primary revenue stream with have to change w/ it?
  • 3 Data Points...
    • Let's say you are approached to invest in a consumer social business that has a network effect. Their user base is 20k DAUs and is growing 30% MoM and they have not yet monetized. Catch is you can only ask 3 questions (for 3 additional data points) to make your decision.
    • What 3 questions do you ask? 

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