Most founders are playing the wrong game.
They’re building like it’s 2016.
Raising like it’s 2018.
Pitching like capital is still cheap.
It’s not.
In a recent conversation with Ben Narasin, Founder and General Partner of Tenacity VC, one thing became clear fast: the rules of venture haven’t just shifted. They’ve been rewritten.
Seed Is Now Series A
The biggest misconception founders carry today is about stage.
What used to qualify as Series A is now seed.
A decade ago, a strong founder with a compelling idea could raise a Series A. Today, that same profile struggles to raise a seed round without traction.
Ben put it plainly: if you’re raising seed in 2026, investors expect a real business. Product in market. Customers. Revenue. Often $500K to $1M ARR or more.
That has a downstream effect.
Series A is no longer about potential. It’s about proof.
You’re not raising to figure things out. You’re raising because you’ve already figured something out and need capital to scale it.
If you don’t adjust to this reality, you’ll keep wondering why the market isn’t responding.
Venture Is Performance-Based Now
There was a time when top-tier founders could raise on pedigree.
That still happens, but it’s rare.
Today, venture looks more like a merit system. Thousands of companies raise seed. Only a fraction earn the right to raise Series A.
Ben described it as a shift from “Olympics” to “open competition.”
Anyone can enter.
Only those with real traction advance.
That means your growth rate matters more than your story. Your metrics matter more than your resume.
If you’re not hitting clear inflection points, the market will move past you.
Great Investors Don’t Diversify. They Concentrate
A lot of advice around venture sounds logical but breaks in practice.
Portfolio construction is one of them.
In theory, investors spread risk across many bets. In reality, the best investors look for a small number of companies that can return the entire fund.
That changes how they evaluate you.
They’re not asking, “Is this a good business?”
They’re asking, “Can this become a $10B company?”
If the answer is no, it doesn’t matter how solid or profitable your business looks.
This is where many founders get stuck. They build something that works, but not something that scales enough to fit the venture model.
The Bar Is Higher Than You Think
Here’s where expectations break down.
A million in ARR used to unlock the next round. Now, it might not even get you in the room.
Ben shared examples of companies hitting multiple millions in revenue and still struggling to raise.
Why?
Because the market compares you against your peers, not against history.
If others are growing faster, raising more, or showing stronger signals, they get funded first.
This creates a simple but uncomfortable truth: good is no longer enough.
Storytelling Is Not Optional
Founders often treat storytelling as a “nice to have.”
It’s not.
It’s how you hire.
It’s how you raise money.
It’s how you sell.
Ben emphasized that even strong businesses can struggle if the founder can’t communicate clearly and convincingly.
Investors don’t just evaluate your numbers. They evaluate your ability to attract capital, talent, and customers over time.
If you can’t tell a compelling story, you create friction everywhere.
And in a competitive market, friction kills deals.
What Actually Matters When Investors Decide
After decades of building and investing, Ben simplifies his framework to five things:
People, people, people.
Great idea.
Huge market.
That’s it.
But there’s a catch.
You have to trigger conviction fast.
If an investor doesn’t feel a strong reaction in the first meeting, it’s already trending toward a pass. Not because you’re bad, but because the bar for attention is extremely high.
This is where many founders underestimate the importance of first impressions.
The One Trait That Decides Everything
You can have a great idea and still fail.
You can raise money and still fail.
You can even have early traction and still fail.
The one trait that consistently separates winners is simple: tenacity.
The ability to keep going when things break.
To adapt without losing direction.
To push through rejection without losing momentum.
That’s not a soft trait. It’s the core requirement.
Because the reality of building a company is this: most of the time, it’s not working.
Final Thought
If you take one thing from this, it’s this:
The market is not easier. It’s sharper.
Investors have seen more.
They compare faster.
They expect more, earlier.
That doesn’t mean it’s harder to win.
It means you need to play the right game.
Build something that grows fast.
Tell a story that people believe.
And stay in the game long enough for it to work.
Everything else is noise.
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Chapters:
00:01 Introduction to Ben Narasin & Tenacity VC
02:50 Seed vs Series A in 2026
05:33 What Pre-Seed, Seed, and Series A Really Mean Now
07:48 Investing for Tier-One Follow-On VCs
10:26 Venture Capital Archetypes & Solo GP Model
14:46 Solo GPs, Fund Performance, and Market Dynamics
16:56 Raising from Venture Firms as LPs
21:16 Fund Size, Deployment Pressure, and Discipline
25:50 Venture Cycles: AI vs Past Tech Booms
28:11 Portfolio Construction & Check Size Strategy
33:18 Check Size vs Investment Strategy
35:19 Decision-Making Discipline in Investing
38:51 Passing on Founders & Honest Feedback
41:09 Fostering Dogs & Personal Values
42:45 Thoughts on Web3 & Blockchain
45:38 Speculation vs Long-Term Investing
47:50 Why Venture is a “Never-Ending Education”
49:58 Investment Approach & Market Focus
50:05 Future of Venture & Geographic Shifts
55:30 Government, Incentives, and Capital Allocation
01:05:31 Lessons Learned in Venture Capital
01:07:50 What Ben Looks for in Founders
01:10:57 Importance of Storytelling
01:12:31 Trusting Your Gut in Investing
01:14:40 Solo GP Advantage & Decision Autonomy
01:15:57 Venture is Not Roulette: Poker Analogy
01:18:25 Knowing When to Walk Away
01:20:12 Final Thoughts & Closing
Transcript
Brian Bell (00:01:07): Hey, everyone. Welcome back to the Ignite podcast. Today, we’re thrilled to have Ben Narison on the mic. He is the founder and general partner of Tenacity Venture Capital, the firm focused on backing transformative pre-seed and seed stage founders and connecting them with top investors for following rounds. Ben has spent decades as an entrepreneur and early stage investor, including founding and exiting many the companies that you’ve probably heard of, also investing in traditional firms before launching Tenacity in 2021. His investments span FinTech, places SaaS, hardware, and more. He writes and speaks widely about startups and staying entrepreneurship. Thanks for coming on, Ben. Hey, thanks for having me. It’s always fun. Well, I’d love to get your origin story. What’s your background?
Ben Narasin (00:01:46): Sure. So I basically have been an entrepreneur my entire life. I just currently live vicariously through other entrepreneurs to fulfill that part of me. I started my first company when I was 12 and businesses for about 25 years. The one that’s most relevant to the conversation most people are interested in having is that in 1993, I started one of the first dot coms in the world in New York City. I’ve been told we invented, invented, whatever that means, cost per click in 94. Took that company public in 99. Never raised venture. So I had enough ownership in that business that when the bubble burst, I was able to take it private and treat all the shareholders well. Everybody was treated the same way, even though everybody wanted to treat me better because I owned the majority of that company. So from there, came to California, got here about 22 years ago. and saw this very large gap in the market, which was that angels were a small, slow processed way of raising money and venture was getting very big. And so smart people with great ideas that only needed about a million dollars to prove or disprove their thesis didn’t really have a great place to go. And so I started what ended up being the second institutional seed fund in around 2007. Dad for about eight years, got to know well over 300 tier one vcs had a phenomenal year where lending club went public in the largest tech ipo of the decade and zenefits raised an equivalent amount of money in a private round was declared the fastest growing sas company of all time a lot of venture guys said hey Maybe you should do Series A and B. So did traditional venture capital for about seven years, mainly at NEA. Awesome firm. And then spun out of there 2021, as you mentioned, to start Tenacity. I didn’t go to NEA just to do Seed, but it was something that I learned while I was there was what I really, really loved. Because I did later stage investing in NEA and Seed, and I just get so much more joy and pride and just generally am better rewarded. for doing seed so spun out started tenacity with their support actually have 40 different venture firms and partners as my backers in tenacity fund one and i’ve just finished investing on a fund one i’m now investing on a fund two wow congrats
Brian Bell (00:03:45): i mean it’s such a journey and there’s so much to unpack there i’d love to like just get your thoughts on on seed versus a as it as it stands today here as we record in 2026 somebody that’s done both of those styles of investing and uh yeah i would love to just get the download there
Ben Narasin (00:04:00): The easiest way to put it is that the seed of 2026 is exactly the same as the Series A of 2016. They have changed in name only. Form is the same. Terms are similar. Prices, amount of money. They’re even... So when I was running the equity practice for TriplePoint, which is a large venture debt shop, I was exclusively focused on funding companies that I believe could be funded by the top 10 to 12 venture firms in the world. So I got to know those people quite well and tried to understand what they were looking for. I would think of those as the tier one firms, right? So several of those firms today say they do the same thing they’ve always done, but they call it seed instead of Series A, Foundation, Menlo, a couple of others, because now a seed could easily be $6 million into a company, 24 posts. So what we were doing then that was Series A is today’s Seed. Seed has fully and entirely replaced it. In fact, you mentioned I write about this a lot. I mean, it must have been 10 years ago I write a story for TechCrunch about how Seed was basically becoming the new Series A, and now it has just taken over. Series A’s today are basically the Series B’s of yesteryear. There’s a different reality. And this has changed. One of the things entrepreneurs don’t always understand about this is that Series A’s used to be like the Olympics, the best and brightest that have already won. its best runner to compete in the Olympics. Top guy or gal out of Cisco or Google goes out and raises a Series A on a great idea. And they say, oh, this is an awesome person. We got to back them. Now, it still happens on occasion. It happened with Neva a while back with the top guy out of Google. But normally what happens now is Series A has become CrossFit. Anybody in the world, and these days about 19,000 people a year, can raise a seed round and go compete. And if they win, guess what? They get a Series A. But it’s based on performance. So it’s no longer the Series A of yesteryear where it’s like, well, great person, great idea, interesting tech, let’s try it. It’s great person, great idea. And it’s working and they’re getting revenue growth that really impresses us. Okay, we want to add fuel to the fire. So Series A has become a fuel on the fire around when it used to be an initiation.
Brian Bell (00:06:02): Yeah, and it sounds like what you’re describing went even earlier to pre-seed, right? Hey, great person, great idea, maybe a little traction.
Ben Narasin (00:06:09): Pre-seed today is exactly what I was doing in 7, 8, 9, and 10 and calling seed. Smart people with great ideas, nothing. Today, when I do seed, I’m expecting revenue. I’m expecting a business. I’m expecting live product, customers, all of that.
Brian Bell (00:06:22): Yeah, and then what’s your kind of bar for seed now these days, like in terms of revenue, traction, stuff like that?
Ben Narasin (00:06:29): I usually say half a million to a million, but I back companies with more. I mean, I’ve had seeds I’ve done with over 2 million, which is amazing because it used to be. So this is one of the things I think entrepreneurs unfortunately have not updated in their lexicon of realities of venture capital. It used to be the case. And by used to be, I’m talking about all the way back in the day when I started out 7, 8, 9, 10, that if somebody seeded you, and you could get to a million in revenue in a year, you could do a Series A. Today, that’s a C, right? So if you want to do a Series A, I think you really need to get to a lot more like three or just have torrential growth at the very end of the tail. So you can get from zero to a million in six months and have a shot, but I think you get from zero to a million in a year, there’s plenty of people that got to two, two and a half, three, and they’re going to get funded ahead of you. So that reality has changed a lot.
Brian Bell (00:07:18): Yeah, I would echo that. I see that a lot of our portfolio companies. We’re very much a pre-seed mostly, probably 70% is pre-seed, and then 20-ish percent is seed. I don’t really do A, but I see a lot of companies fail to raise the A because they just don’t hit that three, four, five million RR, or it’s not at the right inflection.
Ben Narasin (00:07:37): I mean, I had a company that went zero to seven and couldn’t raise an A.
Brian Bell (00:07:42): What do you think it was? I mean, zero to seven is incredible. What do you think it was? I know.
Ben Narasin (00:07:47): It was a fintech business. They were too dependent on lending. The timing was such that people were very worried about interest rates. There’s a lot of sensitivities in fintech that can kill a business that’s otherwise entirely reasonable. And I think they just hit it at exactly the wrong time. But the second business they’re in is doing exceptionally well.
Brian Bell (00:08:05): And I’d love to talk on this thread of your thesis, which is investing in things that I know the tier one firms are going to like. Is that still what you’re doing at Tenacity or are you kind of
Ben Narasin (00:08:15): more like over 300 i last when i left it’s funny when i joined triple point they asked me how many vcs i knew and i was like i don’t know so i wrote a list down of people i thought might be vcs it was seven or eight people when i left that list was 327 people long and it’s been a long time since i left so i know quite a few more so those are the people i take my deals to obviously first among equals amongst my LPs. If you’re one of my 40 BC LPs, you’re going to see the deals. You do have to be a fit. If the perfect fit is not one of my LPs, I’m still going to take you to them. I’m super picky about who I introduce people to because one, I never want to have anybody refuse an introduction. And I’ve had that happen four times in 18 years.
Brian Bell (00:08:49): I think it happened four times today for me.
Ben Narasin (00:08:55): Well, by the way, everybody that said no, it was foolish of them to do so. But clearly I did not have the relationship I thought I had with If I’m bringing somebody a deal, it’s a fundable deal. They may not fund it, but that doesn’t mean it’s not a fundable deal. That may not be a fit for them, but this is a series A that’s definitely fundable. Somebody’s going to back. Back in the day when VCs were trying to figure out how to work with seed funds better, they started to do a lot of dinners for seed funds and they wanted to tier one firms, won’t name them, but great group of people. I had a dinner and had me and about 18 other people there and they were talking about deal flow. And they said, you know who does a really great job at deal flow? Ben Harrison. I was like, thanks. No, I had already agreed to join NEA. So I didn’t want to talk at all at that meeting. But they said, we have never seen a deal from him that was not a fundable deal. It’s like, we’ll never not take a meeting. And that’s my goal to make sure. And so I can’t take an ugly baby out. right? It’s pretty babies only. And so I’m very focused at the very beginning about thinking about what will this business look like a year from now? I always say I need five things to make an investment. People, people, people, great idea, huge market. So, you know, I’ve had on multiple occasions, I’ve asked entrepreneurs to go ahead and write me at the seed, their series A deck for a year later. So I can see what their thought process is, where they think they can be, make sure we’re aligned. And that’s been quite useful.
Brian Bell (00:10:40): But it has to be a really interesting philosophical point that I’d love to ask you, which is like, does venture make the man or does man make the venture? Well,
Ben Narasin (00:10:48): venture is a very, it’s a novel, sometimes the woman, but unfortunately rarer than it should be. Venture is a novel industry. It may be unique. It’s, first of all, it draws a certain type of person. Now that’s evolved. It’s not the same as it used to be. Well, actually, maybe it started off one way, which was more professional and then became more entrepreneurial and has gone back to being more, quote unquote, professional ex-bankers and such, which I’m not as big a fan of. But there are some exceptional folks that weren’t entrepreneurs that are still great VCs, which I didn’t believe could be true. When I moved to Silicon Valley, it was beyond my comprehension that somebody could be a phenomenal VC and never have been an entrepreneur themselves. But what I learned was they can be in certain cases. Like Scott Sendell, probably arguably one of the top three investors ever in venture. He was at Microsoft. So he had operational experience, but within a limit. You’ve got folks like, I don’t know, Mike Moritz was a journalist. That’s a classic one. Bill Gurley came out of banking, if I remember correctly. So There are people that are great VCs that were never entrepreneurs, but there’s also entrepreneurs like David Zee or Reid Hoffman or many others or Alfred Lin who were entrepreneurs first and now have become exceptional. Like you can just, having lived through people’s lives is enormously valuable to be able to understand them, emphasize with them and provide value. Look, I spent 25 years as an entrepreneur learning hard lessons. I would prefer if I can help my entrepreneurs learn those hard lessons without suffering the pain
Brian Bell (00:12:17): Yeah, that totally makes sense. So I guess stated another way, there’s this phrase in venture capital, you’ve met a family office, you’ve met one family office, you’ve met a family office. Kind of the same could almost be said for a VC. You’ve met one VC, you’ve met a VC.
Ben Narasin (00:12:30): Yeah, and not any of the others. I think it’s a bit more homogenized, but it may be sort of that there are tribes and camps in venture. Like there is definitely the ex-operator VC, there’s the ex-entrepreneur VC, there’s the ex-top dog inside of a company who got founded and funded by a venture firm that then hired them in. And then there’s the people that came up the road through the, I went to a good school, then I went to a good bank, and then a recruiter brought me in as an associate, and then I rose to the ranks. The last one being the most homogenized of all, and I think actually a huge risk to venture capital in general. I mean, I loved the associates and principals and, you know, people I worked with at any, they were awesome, but all but one came out of banking. I am not a believer in forcing and having a false set of diversity, but I do believe a diversity of mindset is certainly useful. Like if you don’t have different people, and I don’t care what creates that diversity of mindset, but if everybody’s thinking the same way, looking at a problem, it’s going to be challenging for you as a group. And look, I loved my partners at NEA. I did not love the partnership experience. So I’m a solo GP. I’m the exact opposite of a partnership. There are three of us that have debates when a decision is made on investing after having consulted many experts and doing diligence and working with our pills, my LPs and others. Me, myself, and I. And I actually argue with myself all the time. I yell at myself on occasion. I tell myself I’m an idiot. But at the end of the day, that’s my process. And it is the opposite of a process where you spend months on a deal and then bring it into a bunch of people who’ve never heard of it and have to have a guy tell them in an hour what they’re doing. And then you get to spend half an hour justifying why you should make the investment. Anyway, just not my way of doing things. And I think so far my track record would show that my decision-making process has been adequate to more than adequate.
Brian Bell (00:14:23): Yeah, I haven’t seen, and I’m a solo GP as well, I haven’t seen any data on this, but I would guess that solo GPs have a higher variance around the mean. What I mean is like the good ones are really good and the bad ones are really bad.
Ben Narasin (00:14:37): Well, it seems like the data shows that all the alphas coming out of solo GPs. Certainly were a great performing asset class, if that is such a thing.
Brian Bell (00:14:44): I mean, it’s hard to call an individual an asset class.
Ben Narasin (00:14:46): Hey, look, there’s 12 great single operators. That’s an asset class. But- You know, it does take a lot to raise as a solo GP, as you know. And so part of it is a natural filtration process of whether you’re justifiable to be able to raise money in the first place. And that would normally be tied to your track record or some specific insider experience you have. Admittedly, 2020-21, a lot of people raise solo GP funds that never should have, and they will die a painful death. They’ll milk the fees out for the 10 plus two that they have, and then they’ll be gone. because they’ll never raise fund two.
Brian Bell (00:15:23): Yeah.
Ben Narasin (00:15:25): You know, because they won’t be able to justify it because they won’t have returns. They just, they just, they never should have done.
Brian Bell (00:15:30): And die by our returns. Have you had any friends like that, that, you know, they had a good fund one and maybe tanked on fund two or three and then they were out of the business?
Ben Narasin (00:15:37): No. I mean, I’ve funded half a dozen folks, all of whom were like several were my entrepreneurs in the past and are now managers, and they seem to be doing quite well. It would be hard for me to comprehend that I would be friends with that type of human. And by the way, all my friends are business-related friends. i have a lot of acquaintances so you know like i have a healthy disrespect for some of the pitches that were made as to why people should be solo gps and i’m not shy to i mean i’m not a jerk like i said you’re an idiot you shouldn’t do this but i’m not going to fund them and so not yet i certainly hope i don’t because that would mean i poorly chose in my investments in those half a dozen or so funds that i chose to back right
Brian Bell (00:16:16): So it sounds like you raise from a lot of your follow on VCs, which I think is a kind of a differentiator. I don’t know if I’ve met a VC quite like you. Tell us about fundraising from later stage VCs. What’s that process like?
Ben Narasin (00:16:28): So way back when, when I first started doing seed, I always thought it’d be interesting to have a fund solely backed by other venture firms because my pitch to them back then was, are you people doing seed? You shouldn’t, you’re wasting your time. I will do the seed deal. I will bring it back to you when the time comes, if it’s appropriate. But I got to know so many people, you know, it was a combination of NEA as an investor. And then I have founders of funds. I have GPs at funds. I have younger people at funds. Some of them, you know, the guys that were the founders of funds were very senior at funds that could put in a million dollars. They, I think, wanted to see me be in business. In fact, many of them said, wow, finally? I mean, we’ve been waiting for you to do this. And look, they’re buying a deal, let’s be honest, right? Yes, they want to support me. What’s interesting is I think the conversion of those fund one investors to fund two will be exceptionally low because they wanted to see me get into the business and they wanted the deal flow. I don’t think they need to worry about venture diversification and anything else to continue on. Some will, sure. Because financially, you know, right now we’re showing great numbers, but on a market basis, there’s no liquidity for seed funds this early in. But we’ll see. I have a feeling I’ll have a whole bunch of new folks that are also a venture. So I have exited entrepreneurs. I have unexited entrepreneurs. I have senior VCCs. I have junior VCCs. VCs. I have venture funds. I have LPs that are family offices. I have fund of funds. No, it’s a small fund. We went out to raise 50, ended up with 60. Fund two, I don’t want to be more than 50. I think it was probably a mistake to let myself be oversubscribed. But we’re not a target for these larger traditional institutional LPs. In fact, there was an investor who had invested. They were the largest LP at a large firm that I worked for. I’ve worked for three. So You know, it doesn’t necessarily tell you who it is. And they had invested directly in all my deals. So I went and talked to them and they said, Ben, our minimum check size is the same size as your entire fund. So, you know, the person did invest personally. So I’m happy about that, but it would not have fit for that fund. I mean, a lot of these larger institutions, it’s a challenge. Like even when you talk to folks like at Cambridge, they know the alpha is coming out of the smaller, the solo GPs, the more focused funds, the sort of call it 25 to 100 million, but they just don’t have a way to institutionalize that on behalf of their large clients, unless they create like a sub fund, which they aggregate a lot of other people into. And the other thing is, even though there’s a lot of alpha, you still got to pick, well, not that different than picking great entrepreneurs. Like, I think if I could run another life, like I’ve had multiple lives in my timeframe of having been around this planet for a while, I wouldn’t mind being either An LP myself or a consultant LPs? Because I think generally speaking, they make suboptimal decisions. I don’t think they’re solving the right things necessarily. I think they have, you know, they have to spend a certain amount of time. It looks like they’re doing their job, which is okay, fine. But are you really digging into the right stuff? Some of this stuff they’re digging into is totally, completely irrelevant. And then they’ll just not even bother to talk about the stuff that is. I was amazed. It was sort of like my IPO roadshow. I always say when I did my IPO roadshow, it’s the same as pitching a series A deck. And it’s the same as raising a fund. You tell the same story hundreds of times. And you get the same questions hundreds of times. And they’re reasonable questions. But twice in my IPO roadshow and twice in raising a fund, did somebody ask me a question? I was like, wow, that is legitimately a really good question. I’m going to have to think about that because everybody said that’s good. question. It’s like an entrepreneur. Oh, Mr. VC, that’s a great question. I have a slide for that. I want to do a fake pitch one day where I go out to pitch to VCs and they ask me a question. I’m like, you know, that’s a really common and quite frankly, just totally stupid question. It’s not even really worth my time answering. But if you want to look to the appendix page 72, it’s in there because everybody asks it. But thank you for your limited amount of understanding of the industry that I’m in. Obviously no one will do that when they’re raising money. So everything’s a great question. But on occasion, someone asks you a question that makes you think, and I love that. Rare, but valuable.
Brian Bell (00:20:09): Yeah. So I’ve heard that in the industry, it’s harder to raise a $30 million fund than $100 million fund. And I think what you’re describing is the institutional check size, right? They have to write 10, 25, $50 million checks. And so there’s kind of this push in the industry to get larger, faster.
Ben Narasin (00:20:26): Yeah, I think there’s the virtuous cycle. There’s the anti-virtuous cycle in venture. which is to me, the death of venture over time. One, greed for fees, okay? Which is stupid because we make our real money off of carry and we give our fees back. Two, greed for fees creates bigger size funds. Now, the problem with that is bigger size funds can’t just go out and hire people. That takes forever. It’s not a process you want to go through. It’s a very Sisyphean process. So what does it create? Bigger check sizes and lowering the bar. So that cycle destroys venture. I’m trying to raise a smaller fund for fund two. Number one, it is just me. I’m pretty comfortable with what my capacity is. I’m pretty comfortable with how many hours exist in a day. And I’m pretty comfortable with the fact that it is virtually impossible for me to work harder than I already do. There was a period at the end of last year where I think in four weeks, I was in six different cities and four different countries. And I’m not 23, even though I want to act like I am. I mean, I saw 10,000 pitches in 2023 and 2024, and I funded six. Should I just see more? Where are they? Are they available to me from 8 p.m. to 2 a.m.? Should I be time shifting and just doing demo days in London and Europe? You just can’t lower the bar. and you’re going to have to if you raise more money. Or you’re just going to have to move upstream and do later stage investing.
Brian Bell (00:21:51): I think you made a really good point that I’ve never really heard anybody say it quite like you just did, which is, yeah, we charge fees. Yeah, it’s 2%. But we pay those fees back before we get carry, which is where the real money is. I think that’s a really important point that I don’t think a lot of people appreciate is, yeah, we are paying ourselves 2%. But before we collect any profit sharing, we’re giving all the expenses of the fund back, all your principal back.
Ben Narasin (00:22:15): I mean, you can’t not run a business. Look, personally, if somebody’s watching your show and they reach out like, Ben, you’re awesome. I want to give you your whole fund. I’ll give you 50 and I’ll do it on a zero in 50. I won’t pay you a penny, but I’ll give you half the profit. Well, I’m going to have to spend a long time getting to know you and know that I trust you and that you’re a rational person and that you’re a good person and somebody I want to be in business with for a decade plus. But I would love to do a zero in 50 fund. I can pay my bills. Now, do I want to pay my bills? I would obviously prefer not to dip into my savings and net worth to pay my bills. The point of the structure that was created for GPLP, and it gets warped when it gets too big, and the reason LPs complain about fees. I was having this conversation and Beezer Clarkson was speaking somewhere and I really like Beezer. She was complaining about fees. I’m like, why do you care? We give them all back to you. She said, well, Ben, that’s fair for a fund like yours, but I’m talking about people running multi-billion dollar funds and going out to I’m not going to mention the obvious firm that has pretty much stamped the term fee whore on their forehead that raises billions and billions and billions and billions of dollars, and the founders of which will be dead long before those fees are repaid. I don’t think they’ll make a return anyway. So yeah, but then my question would be, why are you funding them? Why are you funding somebody where you don’t think you’re getting your fees back? That means they didn’t make you a return. That means you didn’t get a multiple. If you’re getting a multiple of size, you’re going to get your fees. So unless you’re worried that it’s going to take you 30 years to get the tax, I’m not saying that’s rational, then okay, maybe you should be investing in something else. So it’s a shared issue, right? Like the LPs need to make decisions to invest in people that they believe will return in an appropriate amount of time and appropriate, the longer it takes, the larger the multiple should be. That’s why seed is a place where you can make big multiples, but it’s going to take a decade plus. And as long as you’re willing to wait that decade plus, do I want to run my own business out of my pocket for 10 years before I see carry? Absolutely not. Unless you want to give me a lot more carry. And then I’m happy to do it. I will invest all my own money down to zero dollars of net worth left to have a zero and 50 fund. I mean, when I raised my fund, I committed in my own head, but on paper to the first fund to be a 10% GP commit in my own head to three. That was over 50% of my liquid net worth. I’m already in this thing extremely deep. And I’m more than happy to bet on myself. But that’s not the structure people are accustomed to. So, you know, why raise it a model that people don’t understand? I love that.
Brian Bell (00:24:43): Yeah. I’ve just never heard anybody say it quite as succinctly and clearly as that. You’ve been through lots of different trends and cycles and, you know, obviously AI, this, AI, that. How does this feel? Does it feel like a history rhyming right now with other tech booms or is it?
Ben Narasin (00:24:55): Sure. No, I mean, I built a business in the tech bubble of the web. 93 to 2003-ish. A lot of similarities. Now, mobile, not as big. I mean, big, but not as big and world changing as this. The same thing with Web3, which I never bought into as a concept. But it’s interesting. One of my founders called me and he’s like, man, so exciting. You know, I just got this call from this customer and he’s literally willing to pay us anything to get into our business right now because he’s too small. So we said no and he’s willing to. And I said, look, I’ve seen this movie before. We’re in the stage where this is exactly like it was in the web. And people are now starting to talk about already the same sort of things that they did back then. First, nobody cares. Nobody understands it. Nerds only. Geek, geek, geek. Then, this stuff’s interesting. I’m seeing these stories. Inter what? Huh, I’ve got to check this thing out. Then it’s like, oh, the web is coming. Okay, well, nobody ever buying it. And then like, oh my God, this thing’s everywhere. We aren’t there. And then management says, you need to get us in because this is an existential threat and we need to be in front of it. We are going to die if you don’t cover our butts in this category. And so they run out and they spend any amount of money, crazy numbers. They don’t know what it’s worth. They don’t know what it’s worth, so they pay whatever people ask. And then, and this is where we’re getting, year, year and a half, two years later, show me the money. Show me what I got. I gave you all this money. Show me the value. So it goes from ignorance to interest to excitement to panic to logical thought about what the value was. We are moving from the panic to the logical value for the people that bought. For the people that haven’t bought yet, they’re probably still in panic mode and will overpay. Now, there will be a shakeout, like there always is. And the companies that prosper will be outrageously valuable. And the ones that die will, of course, be dead.
Brian Bell (00:26:36): Yeah, really well put. $50 million fund. Tell us about your check size, portfolio construction, all that stuff.
Ben Narasin (00:26:42): Yeah, so we ended up with 60, one to $3 million checks. We tend to lead. I’m not, it’s funny, portfolio construction is an interesting topic. I was talking to an LP, one of the smarter ones, and he asked about portfolio construction, not for this fund, for a different fund I was raising. Yeah, we talked about it for a while. And I said, by the way, have you ever seen a fund that was perfectly constructed by classic portfolio construction theory? And he said, I did. We invested. How did it do? Worst fund I have ever backed. So I was like, and yet you still ask. So at the end of the day, my portfolio construction is awesome only. I want founders that make me say, wow, I want huge markets and great ideas. And I want to believe that I can return the entire fund with any investment I make. And I That’s pretty much it.
Brian Bell (00:27:31): So you’re not sitting there saying, I need X percent ownership, X number of companies, this many breakouts, this many zeros.
Ben Narasin (00:27:39): No. I mean, I think about ownership, obviously, but I don’t start with a model and then go try to fit companies into it. I start with companies that I think can be great and then figure out how to make the math work. If I like something enough, I’ll find a way to get into it. If I don’t, no amount of model is going to convince me.
Brian Bell (00:27:55): Yeah, that resonates. What about follow-on? Do you reserve for follow-on or is it mostly first checks?
Ben Narasin (00:28:02): I reserve, but I’m not dogmatic about it. If something is working really well, I’ll lean in. If it’s not, I won’t throw good money after bad just because a spreadsheet told me to. Again, it comes back to judgment. I think people hide behind models sometimes instead of making hard decisions.
Brian Bell (00:28:17): Makes sense. What do you look for in founders at this stage? You mentioned people three times earlier. What does that actually mean in practice?
Ben Narasin (00:28:25): It means a few things. One, intellectual honesty. If I ask you a question and you don’t know the answer, just say you don’t know. Two, self-awareness. Do you understand what you’re good at and what you’re not? Three, resilience. This is going to be brutally hard. If you haven’t been punched in the face before, it’s going to be tough. And four, the ability to recruit. Because no matter how good you are, you can’t build a big company alone.
Brian Bell (00:28:46): Yeah, recruiting is such an underrated one.
Ben Narasin (00:28:49): It’s everything. The best founders are talent magnets. People want to work with them. And that’s how you scale.
Brian Bell (00:28:55): Do you think that’s learnable or is that more innate?
Ben Narasin (00:28:59): I think parts of it are learnable. You can get better at communication, storytelling, clarity. But some of it is just who you are. People can tell.
Brian Bell (00:29:08): Yeah. As we kind of wrap here, what’s one thing you think founders consistently misunderstand about venture capital today?
Ben Narasin (00:29:16): That it’s about them. It’s not. It’s about returns. And that sounds harsh, but it’s reality. We are fiduciaries. We have to return capital to our LPs. So when a VC passes, it’s not necessarily a judgment on you as a person or even your business. It might just not fit what they need to do.
Brian Bell (00:29:32): That’s a really important distinction.
Ben Narasin (00:29:34): Yeah. And the flip side is also true. When they say yes, it’s not because they love you. It’s because they think they can make money. Now, ideally, both are true. But don’t confuse the two.
Brian Bell (00:29:44): That’s a great place to end. Ben, thanks so much for coming on.
Ben Narasin (00:29:47): Thanks for having me. This was fun.
