How The BEST Founders Go From Seed To Series A - a convo w/ Brett Berson of First Round

**Tyler Hogge** (0:00)
Open AI will kill everybody, potentially. Is venture capital changing in real time? Do founders need to raise venture capital?

**Brett Berson** (0:07)
There's a whole series of questions that when you try to answer them, I think it makes you a worse investor.

**Sterling Snow** (0:11)
What's the success rate?

**Brett Berson** (0:12)
Of all of the companies we have the chance to partner with at Seed, it's like 82% raise an A.

**Sterling Snow** (0:17)
Geez, 82% is incredible.

**Tyler Hogge** (0:19)
It's phenomenal, I wouldn't have guessed that high.

**Sterling Snow** (0:21)
I would have, yeah.

**Tyler Hogge** (0:29)
So Sterling and I are in the plane yesterday, flying over here. He gets off the flight. We walk in through SFO, and he had already started texting me while we're landing. He's like, Tyler, my mind is blown. I've just created a very complex app on Replit, and software is different, man. Software is not gonna be the same. Venture capital is not gonna be the same. The best founders will not need to raise venture capital.
Everything is different, and I'm not quite sure what's going on here. What do you think about this? Like, is software, is venture capital changing in real time? Do founders need to raise venture capital?

**Sterling Snow** (1:10)
Let me, just before you answer, the idea is that because anything you can think of, you can build, and it's very, very cheap, and very, very easy, and so the software will be like air. We're gonna breathe a lot more of it, but will it yield big software companies, like application software companies, like we've seen in the past? So anyway, that's...

**Tyler Hogge** (1:35)
And if you don't have any takes on this, great, but I would love to know what you think.

**Brett Berson** (1:39)
I think a lot of these things are very hard to figure out, actually how they sort of instantiate themselves. As an investor, one of the most powerful things that you have is the ability to choose the questions that you want to answer when you're thinking about investing in something. And founders have those choices as well. So something that we briefly talked about a long time ago is like, you know, you're meeting a founder and they have a prototype and no revenue yet. You can choose to ask questions like, where is the compounding advantage of this business? Or where is their defensibility in this business? Or, I think the founder is really good, but what about them running a publicly traded company at some point because that's what ultimately matters. And so you can spend a lot of time sort of asking those questions and trying to answer those questions. You could also say, I will not ask any of those questions or think about any of those questions. And I'll only spend time thinking about, can the company get to a million in revenue? Can the company get to two million in revenue? Can the company get 1,000 customers? Or whatever sort of proxy you want to use. And I think sort of the way that I tend to look at things is it's very hard for anything to ever work at all, at any scale, in the context of what we do. So we only meet pre-product market fit companies. The vast majority of the companies that we partner with have no products.
And so, sort of said slightly differently, is if you're to look at all the times we partner with a company and it doesn't work, the reason it doesn't work is it never works. And so, sort of one way to answer it is to basically be very short-term oriented, which is counterintuitive, I think, in venture, which is so long-term because a business that will be consequential to us will take, you know, 11 to 15 years probably in the totality of sort of the whole journey. But sort of in that lens, I think, you don't necessarily have to answer this question of like, is all software going to change and sort of so on and so forth. So part of the reason, so part of the reason I haven't spent a lot of time or have a strong point of view is that it wouldn't change sort of that general lens that I tend to look at things in.
And again, I tend to be more sceptical that it is knowable. And so there's a whole series of, there's a whole series of questions that when you try to answer them, I think it makes you a worse investor and potentially a worse founder. If you go back to the thing we were talking about earlier, which is like, it is true that all great software companies and all great businesses develop some form of power over time. Having said that, if you spend a lot of time trying to answer that question, there's a lot of companies you would never invest in that end up being spectacular businesses.