517. Fear and Greed in AI, The Rise of Kingmakers, and Is Seed the Sucker Round? (John Chen)

Nick Moran (0:00)

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Now on to the episode.

Welcome to the podcast about Venture Capital, where investors and founders alike can learn how VCs make decisions and reach conviction. Your host is Nick Moran, and this is The Full Ratchet. John Chen joins us today from Los Angeles. He's a general partner at Fika Ventures, a pre-Series A venture firm investing in B2B companies across vertical AI, fintech, developer tools, and other real-world industries. Before Fika, John was an investor at Emergence, a writer for TechCrunch, and chief of staff at Box. He's invested in companies including Evo, Sift, and Ciro. John, welcome to the show.

John Chen (1:07)

Thanks, Nick. Great to be here.

Nick Moran (1:09)

Always good to see you, man. So tell us, why build a firm in LA?

John Chen (1:14)

That's a great question. So we were founded in 2017, and the thesis was pretty simple, which is there was going to be a whole class of founders emerging from SpaceX and ServiceTitan and Snap that were going to want to work on B2B ideas. I think the per-per-realism at the time was LA is more consumer focused, more media focused, but we really wanted to plant the flag for B2B.

Thankfully, that bet has paid off. We backed our third SpaceX team, our fourth XServiceTitan team, and so I think a lot of any company or any founder that is working on a B2B idea is likely going to shop at Fika if they're based in LA. But since then, we've grown to become a nationwide brand. So a third of our companies are in LA and two-thirds are everywhere else. So we're always on planes. So that's reason number one. Number two, just going back to LA for a bit, it's the home of a lot of the real world industries that we care about. So the trades, shipping and logistics, aerospace and defense, there's a lot of large industries here that are important customers for a lot of our companies. And then the third, maybe strategically, on the firm building side, we think about it as being close enough to the echo chamber of San Francisco so that we can be SF calibrated, but far enough away such that you can still have some distance to have some independent thinking. And that's really important for us to be not high on our own supply and be able to stand apart and have some room to think about things for ourselves.

Nick Moran (2:54)

How much time are you spending in the Bay Area every year?

John Chen (2:58)

I go up there once a week, actually. So we are constantly up there to the point of being SF calibrated. Because there's no denying that some of the best founders are there, and they are setting the bar for what excellence looks like.

I think there's still a lot of things that don't make sense that we're seeing, but it's important. The only way to be able to tell the two apart is to have some distance from it. So we spend a day or two up there every week. I do personally, but you can come back and really have some space to work through things.

Nick Moran (3:35)

So give us an example of something that doesn't make sense, or maybe highlight some profile differences between Bay Area founders and LA founders, you know, aside from just kind of the Stanford and the tech pedigree.

John Chen (3:52)

I think there is a lot of insider... I mean, I think that the number one trait is whether you are an insider or an outsider.

And you know, a lot of Fika success actually has been finding a lot of folks that are on the periphery, on the outside, that don't have YC or Stanford or things that are really legible to SF investors and helping them sort of move towards the inside, the insider track. And you know, a great example again, Ivo is a company that we met the founder three months after he moved here from New Zealand. He was a corporate lawyer in New Zealand. He did not have YC, did not have Stanford on his resume, was not legible to the SF firms. But just an incredible founder. When we talked to him, he's thought about every question that you've asked five times over, like an incredible product mind. We put him in front of three general councils, who are his customers, or these were prospective customers at the time, but he was able to close all three of them in 20 minutes with just a demo of the product. And we were like, there's something here. And again, it's someone that was again, passed over and overlooked and misunderstood.