Episode 425 of The VentureFizz Podcast features Charlie O’Donnell, Founder of Brooklyn Bridge Ventures and now, a published author.
Charlie is a staple of the NYC startup scene and someone who has had a significant influence in helping to build the ecosystem to what it is today. I first met Charlie back in 2010 at First Round Capital’s offices in NYC. At the time, I was helping out some of the city’s early high-flyers, like Birchbox. As you’ll see if you’re watching the video – or hear in this interview, I actually still have his business card from that meeting.
2010 was still the early innings for New York tech, and our conversation is a fun trip down memory lane. Charlie had his hands in some of the most important building-block companies of that era, including Foursquare, GroupMe, and Etsy. We also dive into the story of his investment in Backupify, a Boston startup founded by Rob May that was eventually acquired by Datto.
After his time at First Round, Charlie went on to launch Brooklyn Bridge Ventures, becoming the first VC to plant a flag in Brooklyn. He is now out with a new book titled Founder Unfriendly: A No-Nonsense Guide to How Investment Decisions Actually Get Made. It’s an honest look at what actually happens after you leave a pitch meeting.
Chapters:
00:00 Intro: Charlie O’Donnell
01:44 Meeting Charlie Back in 2010
03:27 Advice for Networking and Navigating the Job Market in 2026
06:35 Getting His Career Started in Corporate Pension Fund Industry
12:49 Early Days of the NYC Startup Scene
15:43 Early at Union Square Ventures
20:32 Early USV Deals: Twitter, Delicious, Etsy, Indeed
27:50 Challenges of Building in Recruiting & EdTech Industries
31:32 How Foursquare Led to NYC’s Startup Rebirth & His Role at First Round Capital
43:42 Sourcing GroupMe
49:00 The story of Backupify
52:16 Launching Brooklyn Bridge Ventures
54:35 Becoming a VC Coach
55:27 Founder Unfriendly – Book Details
58:55 Is Your Company a Fit for Venture Capital?
01:05:22 How Your Investors Might Affect Your Exit
01:12:59 More Details About Founder Unfriendly
Keith Cline (01:44)
Charlie, thanks so much for joining us.
Charlie O’Donnell (01:46)
I’m excited to be here.
Keith Cline (01:48)
I feel like this is long overdue because we met a while ago. We’re gonna go through your professional history, but I still have this, your business card from First Round Capital. So that’s when we first met. I remember I came up to New York City. I was so excited. It was probably one of my first trips to the startup ecosystem of New York. And you were like one of, I mean, you still are one of the primary builders, supporter of this. And this was early, like what year were you at First Round Capital? I mean, what years?
Charlie O’Donnell (02:14)
09,
end of 09 to end of 11.
Keith Cline (02:18)
Yeah, so that was early innings of the New York tech ecosystem that obviously has just absolutely blown up. So we’re gonna talk about that, but I was just like, I can’t believe I still have this. Back when business cards mattered.
Charlie O’Donnell (02:27)
We need to tell you, just so
you know, it is March 12th, 2010 is when we met up. no, we did a phone call.
Keith Cline (02:38)
I met you
in your office. remember coming in. I was all excited because I’m like, meeting with First Round Capital.
Charlie O’Donnell (02:41)
Yeah,
actually, so we did a phone call in March and then ⁓ June of 2010, June 16th, ⁓ we met in FRC’s offices in New York.
Keith Cline (02:47)
Wow.
You actually have that. That’s even better.
Charlie O’Donnell (02:56)
I have my calendar
going back through my Union Square years from like 2005.
Keith Cline (03:02)
You should somehow AI that and look at all the dots that it probably create some sphere of like your connections of everything you’ve done.
Charlie O’Donnell (03:10)
Do you not think that I did that for book marketing purposes? If I met you sometime over the last 20 years, you are getting an email if you haven’t gotten one already about the fact that I’m launching a book.
Keith Cline (03:21)
There you go. Well, you know what? I was going to ask you this later, but I think this is perfect jumping off point. You wrote a post recently about networking and I have two college age kids and they their dad is a recruiter, runs VentureFizz makes connections every day. So they have in their mindset that I need to be networking, networking, networking, which they’ve learned. And I’m grateful that they’ve listened to me. What advice do you have around networking? Because I just think it is so critical.
in today’s world, you can’t apply to a job and get an interview. That’s like impossible now. So what advice do you have for people on networking?
Charlie O’Donnell (03:59)
First of all, I wanna know what you are telling them in this world of AI eliminating entry level jobs and no loyalty. We could do a whole podcast on like, what kind of a career are your kids going to have? I I worry about this and my daughter’s four and a half. I mean, you can see the art on our wall here, but ⁓ it is a very fascinating question.
Keith Cline (04:21)
Sales,
sales. My daughter’s graduating from college. She knew, she’s extrovert, she loves talking to people, she’s going to be in sales. She already has a job lined up, so she’s excited. So yeah, no, it’s definitely a different world out there and the whole communication skill set, problem solving, communication. Like those are so important in today’s entry into the workforce criteria.
Charlie O’Donnell (04:48)
I have been speaking to a lot of entrepreneurship classes over the last couple of weeks ⁓ in and around the book. And somebody asked me about the skills and traits related to ⁓ being good at venture capital or even being good at entrepreneurship. And I said, you have to be willing and unafraid to talk to anyone. And…
to swing for the fences in terms of reaching out, right? You’re recruiting for your startup and yeah, you have a friend who’s in marketing, but are they literally the best marketer that you can find for this thing? And you have to be able to cold reach out to someone that you have no connections to and say, hey, I’ve followed your stuff.
I’ve read your newsletter, I saw the podcast. I really want to talk to you about this great opportunity and feel confidence in that and not get wrapped around the axle around like, why does this person want to talk to me? And all of that sort of stuff. that is number one mindset. And it’s something that I regretted, something about the way I networked, I really missed out on. And I was overly transactional.
and short-term focused about the way I thought about networking. So I started my career at the General Motors Pension Fund. So the big institutional LP money, I’m pretty sure it was the largest corporate pension fund at the time, probably still is, guess, assuming that it was a high school internship. It was crazy. So my high school third semester of senior year basically kicked us out.
Keith Cline (06:24)
How did you land that job?
No
Charlie O’Donnell (06:36)
Because we’d already applied to our colleges and we were just waiting to hear back and assuming you just passed, you don’t get your offers rescinded and stuff. And they said, OK, this is a recipe for trouble. February until June, get out. Just leave. And ⁓ we did internships. Most of us did internships. Some people did community service projects. A lot of kids did that because you used to get out a little earlier than if you did the internship.
I opted for an internship, somebody had a connection to the pension fund. And so I worked there from February until June. And first of all, it was an eye-opening experience that having a skill was more important than almost anything else. And so I got that internship with a top of the class, which I wasn’t, I was maybe at like the one third mark. It’s better than…
better than half, maybe not top quartile. I went to a very competitive school. And I was going to Fordham, he was going to Harvard, but it was 1997. And my dad had brought a computer into our house in like the late 80s. And so I had been using spreadsheets and all of that sort of stuff. And so I had Excel skills and my…
partner of this internship, this other kid who, you know, top of the class, Harvard bound, didn’t have a computer in the house. So he got all of the credit photocopying, you know, the intern jobs, right? And I got work that other people were doing. And so when I stopped at the end of June, I said, I don’t think anybody wants this work back. Would you keep me on over the summer? And they said, yes.
Keith Cline (08:14)
Right.
Charlie O’Donnell (08:32)
And I stayed every summer. And then at some point, because I was going to Fordham and it was a quick commute, started working part-time during the school year. So I had already been working for the General Motors Pension Fund four years when I graduated college. And the one group that I had not worked with before that happened to have an opening, because in the buy side, they don’t really recruit big analyst classes when something pops up, was the private equity and venture capital group. And this was…
February of 2001, I saw 10 negative quarters of performance in venture before I ever saw a positive one. Because if you think about 2001, right, and there’s also a little valuation lag as the company sort of burned down their money, VCs used to come in and say, okay, we’re triaging our 1999 vintage portfolio.
Keith Cline (09:14)
my God.
Charlie O’Donnell (09:31)
A third of the companies in here are dog shit. Those go away. A third of the companies we think have some potential and the third of the companies is on the fence, right? And then we meet them six months later and they’d come back and be like, okay, a third of the companies that are left are dog shit and whatever. And this would go on for a couple of years. And then at some point they’d come in and be like, yeah, we’re not returning capital on that fund. That fund is a mess. We’re gonna take a mulligan on it. Investing in peak.com era valuations.
And it was really fascinating because in 2004, 85 % of our portfolio came back to market. It used to be that like roughly a quarter of your venture fund portfolio came back to market because everybody was sort of staggered, their timelines, but everybody stopped investing in 2001, stopped on a dime, right? And then, you know, eeked everything out. And at some point they’re like, okay, we got to raise a new fund. So 2004.
Everybody comes back to market and we had a bunch of interesting choices. We could like abandon venture entirely. TIA craft did that. We could decide all of our managers were crap and we want all new ones. ⁓ We could double down on venture, which actually we did. And so we had the opportunity to that because some people post the dot com crash, some people abandoned things.
And so we had this instance, like for example, in 2004, we’re evaluating Excel. And in 2004, Excel’s last two funds are not good. There’s like a 98 fund that’s trash, and I think there’s like a 2001 fund that’s like trash. And it had been like, 94, the 94 fund is like a 20X returning fund.
Keith Cline (11:13)
Wow.
Mm-hmm.
Right.
Charlie O’Donnell (11:29)
But it
felt like those were different people. Some of those people retired. Like it is a real question that Excel is still a top tier fund. And funny enough, the Harvard Endowment bailed on it. So Harvard missed out on Facebook twice. Once, that’s the Facebook fund. That is the 2004 vintage Excel fund is the Facebook fund. And that is.
Keith Cline (11:47)
Right, I was gonna say that sounds like Facebook ears, yeah. Yep. Yep.
Charlie O’Donnell (11:57)
one of the best performing funds of all time, but at the time, there was a real question whether or not you wanted to re-up in Excel. Which during that time, that’s also how I met the guys from Union Square Ventures, because we were looking at emerging managers. We met Bijan at Spark. And we knew Todd Dagres from his days at Battery, so we were already a Battery LP. It was a natural exception to do Spark.
The other guys from USB came in and we almost didn’t take them seriously because who’s building a New York venture fund in 2004? First of all, we don’t have garages, so how do you even build a startup if you don’t have a garage, right? You’re certainly not building a mountain Queens.
Keith Cline (12:37)
Right? Are you- what?
DoubleClick was the big company then, right? That was the big home run.
Charlie O’Donnell (12:55)
Yeah, you know, there was clearly a Silicon Alley late 90s scene, right? Jason Calcantes was running around.
Keith Cline (13:03)
So, well, so I was gonna
say, I used to get Silicon Alley Reporter physically mailed to me once a month or however often Jason Calacanis published that, but I would get, cause I was like, this is all my leads for recruiting.
Charlie O’Donnell (13:18)
Right? Right. When people think about growing ecosystems, ⁓ you need some stability and downturns. And one of the big issues and the reason why the Bay Area didn’t go away in the same is because some of those late 90s companies, the eBay’s of the world or whatever, ⁓ made it through. Right? So you could be in a dot-com startup that blew up in the Valley in the late 90s.
but you had other places to go. You could go work at eBay, can go work at Yahoo or wherever, there were still, ⁓ hell, you can work at Oracle and Sun and all of these places, because there’s this multi-generational startup success. So there were safe, stable places to retreat to in the downturn. In New York, everybody retreated to banks and ad agencies, basically.
because there wasn’t anything big and stable at the time, all of the funds, right? There wasn’t even a New York based fund at the time. I’m trying to think, like if I can even think of one that was past a fund too. And so, you know, and you had all of these LPs, which were not long-term LPs. And so people didn’t really, when everybody picked up their marbles and went home, they literally, it was tumbleweed.
because any LPs in any of the Silicon Alley funds like literally went away because they were not the Ford Foundation that had been backing Sequoia since 1972. Like it was just this random conglomeration of, know, Johnny Cum Lately banks and other pools of financial capital. So literally there was a gap from 2001 to 2004 where like nothing happened. Like absolutely nothing happened. But
The internet was happening, just not startups. You went from working at your startup in the late 90s to building a microsite for Reebok or something because you worked at Avenue A Razorfish or any of these ad agencies and all this sort of stuff. So people were around, but not at startups. The ecosystem really kind of reset in kind of the 2004 timeframe.
Keith Cline (15:29)
Mm-hmm. Yep.
Okay, so then you went off to Union Square Ventures, which was in the early, early days.
Charlie O’Donnell (15:46)
Yeah.
After GM passed, so I really got to know those guys really well and I banged the table real hard for GM to make an investment. We decided it was too small because we were used to writing $50 million checks for funds and they were raising $100 And so the idea of squeezing $15 in there, we felt like wouldn’t make a big impact. Now that $15 in would have been $300 out. That would have been a nice big impact, but you don’t bet on that.
And we also assumed that if they panned out, the next fund would be bigger and we would just hang around the rim. And it wasn’t. And those guys have stayed very consistent in terms of their fund size. And if you didn’t get into fund one, that was kind of it.
Keith Cline (16:32)
It’s going to be hard. Yeah, it’s already locked
in for fun two, fun three, whatever, vintage.
Charlie O’Donnell (16:36)
Yeah, kudos
to Linda Leakman and Sarah McMahon and their team at Texas teachers for writing the big check early on there. ⁓ you know, that was, ⁓ you know, that was a risk. was a fund one, two folks who not worked, Brad and Fred had not worked together in the same fund before. ⁓ And the whole New York thing was really…
you know, ⁓ not necessarily seen as a positive. After they passed, after we passed, ⁓ I emailed Fred and I was like, what’s a junior person even do in venture? Like, do I need a computer science degree? Do I need an MBA? I was literally and totally honestly asking, what do I need to do next so that I can then get a job in venture? And if you ever email Fred, you know you don’t get
moved back more than like one line at a time. And he emails like text messages and he just writes back, you want to come and find out? And like, that was it. That was like the whole exchange because we had been getting to know each other back channeling through our blogs. Because Fred started his blog in November of 2003 and I started mine in February of 04.
Keith Cline (17:42)
Yeah.
Charlie O’Donnell (18:00)
And we started this little back channel comment thing and he got a window into the way I was thinking, which by the way, it goes back to your original question that I sort of way veered off on is the networking advice. We’re knowledge workers, right? If we were fashion designers or architects, we would have portfolios.
I mean, we would have this is how I think, this is how I build, this is, Do you think that LinkedIn is your resume? Your job history is a portfolio of how you think? No, I haven’t, you have no idea just looking at my background, how I think about investing from looking at the places I have worked. Like I, you know, ⁓ could think very differently than anybody else. So I got this
Keith Cline (18:26)
All
Charlie O’Donnell (18:56)
view early on that ⁓ your writing, what you share, what you put out into the world, gives other people an opportunity to see how you think. And that is what they are buying, essentially. So by the time I sat down with Brad and Fred for lunch, it was like starting out on the fifth date. They were asking me questions about things I had written and I’d commented on theirs and they had already gotten a chance to sort of get me to it.
to know me, both through the due diligence process on their fund, so they knew I was paying the ask and could ask sharp questions, but also through my writing. And that really helped me get a position. we had a ⁓ USV analyst reunion dinner. I joined that dinner. And I felt like the World War II vet with the high school background, know, looking.
We old Charlie and he’s the first guy, you know, back when we had a physical phone on the desk and everybody who knows that I became an analyst at Union Square always asks me like, you know, what’s the trick to getting through that recruiting process? And, you know, it’s like this NCAA tournament of trying to get that job of working for, you know, one of the best teams in venture. They didn’t interview anybody else. I was the only guy they knew.
Keith Cline (19:57)
you
Right.
Charlie O’Donnell (20:21)
You
seem reasonable enough. Let’s take a shot on him. And that was basically it. so I was there for almost two years in 05 and 06.
Keith Cline (20:32)
What were some of the deals made during your time there, like Twitter or?
Charlie O’Donnell (20:36)
Uh, no, I was actually, um, I wound up in Nick Bilton’s Twitter book because I was at South By when Twitter blew up and I, there’s a flurry of emails that I sent to Fred and I was like, Oh dude, I totally get this now. Like, this is like a weird sneak preview of what it would be like if everyone was on Twitter because in 2007 everyone at South By was on Twitter.
And it was the most amazing proving ground for it because it was a multi-channel conference. You met all these random people. I’m not going to give my phone number to just the person I sat next to. Oh yeah, follow me on Twitter. This is cool. Yeah. Where’s everybody going for lunch? What panel? Oh, this panel sucks. Like, I was like, Oh my God, this is like a totally different way of communicating. So I’m emailing Fred. was like, dude, I, you got to look at this. I’m totally, I get this.
I think Fred’s first response is like, Gould did this back in the day with you park and group text messaging. I was like, no, no, no, it’s totally different, right? Fred joins Twitter two days later and leads the series a, he was like two months later, right? Who knows if, yeah, I’m sure he would have.
Keith Cline (21:53)
How many times
have you had to explain your Twitter handle?
Charlie O’Donnell (21:57)
One punch, it is my initials. You know, I’m not on Twitter anymore. I’ve held, yeah. But no, I…
Keith Cline (22:03)
Okay, but back in the day, you were ⁓ an Uber user. I remember you telling
me that once. You’re like, yeah, it’s my initials. It’s not CEO NYC, because…
Charlie O’Donnell (22:11)
Yeah, no, it’s not a
douchey corporate thing. But yeah, Charles Eric O’Donnell. CEO NYC was like my AOL screen name back in the day. So that’s where that came from. But yeah, so being at UnionScore was really fun. And actually, it’s funny because the best value I think I contributed was not
Keith Cline (22:14)
Right?
Charlie O’Donnell (22:38)
doing deals in any way. mean, to be honest, everybody was pitching Fred Wilson and Brad Burnham. I brought in, while I was there, I brought in zero incremental deals. like I was a nobody, I was low person on the totem pole. I learned so much. And I have a particular view of like junior investors in venture now, because I sat there and I’m like, I don’t know why these guys are paying me, but I’m learning a ton in every meeting. And I don’t even think I took a meeting with a startup that wasn’t with one of them.
Because I’m like, what do I know? I’m not gonna be able to, you know. So I’ve very much learned a lot about how they think about markets and investing. And they’re both just super thoughtful. I’m doing dinner with Brad Burnham ⁓ in May with Brad and then a bunch of recently minted partners or principal to partner folks to just, you know, brain suck everything that he knows. And he’s just.
really brilliant and thoughtful about how funds are constructed and markets are constructed. ⁓ But anyway, yeah, while I was there, we did ⁓ Delicious, which was a, yeah, like Josh actor, so, And ⁓ I really thought like, when I was at GM, we did a little bit of late stage investing.
Keith Cline (23:49)
yeah. Like a bookmark sharing if my memory’s correct.
Charlie O’Donnell (24:06)
So it was clear that the things that were coming in were companies.
The beginning of Delicious was like Josh Shachter in a room with a folding table and a desk, a folding chair and a folding table as a desk, and server going down left and right. I was like, oh my God, this is really starting from nothing. And here’s this geeky engineer founder who…
Keith Cline (24:28)
Right.
Charlie O’Donnell (24:37)
like, this is the beginning of a company. Like, this is the primordial ooze. And I was really blown away with like how little somebody can start with at the beginning. So I got to see that delicious built in an office. There’s a couple floors down from us in the same building at 915 Broadway. And then I got to be in the first Etsy pitch meeting. Fred and I took the subway over to Fort Greene and…
Keith Cline (24:58)
Really?
Charlie O’Donnell (25:06)
It was an apartment with a long folding table, four computers next to each other. There were four founders at the time. And I heard that that apartment that they built out of the landlord was taking equity in lieu of rent. And what happened was when they did the series A,
Keith Cline (25:26)
You’re kidding.
Charlie O’Donnell (25:33)
I think that guy walked away with $9 million. And I remember, Pranit sent me something along the lines of like, I made an extra call to that guy because he’s selling into a Series A for a company that everybody believes will be big one day. And he said, you know, I just want to make sure that you understand that the rest of us are very optimistic about the…
with growth and I don’t want to feel like you got the wool pulled over your eyes, you know. And the guy said something like, I just made $9 million on something I don’t even come close to understanding. I’m good. You’re never going to hear from me again. Yeah. It’s just a rando Brooklyn real estate guy who, who, who, you know, pulled a secondary in the Etsy, uh, series a to make all the cap table stuff work. But, um,
Keith Cline (26:15)
That’s awesome.
Charlie O’Donnell (26:30)
Yeah, Rob Kaelin was a very interesting, creative founder. He told us about how he used to, I remember it was Harvard or MIT, but he was in the area and he just sat in on a bunch of classes and like no one seemed to mind that he was just randomly walking around classes and not enrolled. And he’s a super interesting ⁓ founder. And then we did Indeed. That was the other big one while we were there.
Keith Cline (26:59)
Wow, okay.
Charlie O’Donnell (27:01)
⁓ Paul and Ronnie came in and ⁓ there’s a big negotiation about the price of that round. It like a $4 million raise. I think it was like a pre of 11 and 11 felt expensive at the time and we almost didn’t do that deal.
Keith Cline (27:22)
$15 million post.
Charlie O’Donnell (27:24)
Yeah, that seemed really expensive
at the time. And by the way, that is one of the best performing deals in their portfolio because they didn’t raise after that.
Keith Cline (27:36)
really? Just an A? Wow. That’s great.
Charlie O’Donnell (27:38)
They just the first round and
they did a secondary or something at one point, but everybody owned a big chunk of that company going in.
Keith Cline (27:50)
Okay, then one of your blog posts that I just I’ve referenced even though it’s probably like well it’s ancient but ⁓ you started your own company that was in the know recruiting it was for colleges like college recruitment and ⁓ like I get pinged by people like hey I’ve got this idea to start a company and recruiting and I just I’m like
Charlie O’Donnell (27:58)
mentioned.
do you send them
why this space is terrible?
Keith Cline (28:18)
I totally
do. I totally do. I’m like, you gotta read this post. Before you do anything, read this from Charlie O’Donnell and maybe rethink. Because I’m like, they are the last people to change how they do things.
Charlie O’Donnell (28:30)
You know who else references that post a bunch and I think has a version of his own. ⁓ Ben, is his last name, Joskowitz, the Canadian guy who also built something in the space sort of not long after we did and we sort of commiserated around that space. But ⁓ yeah, it is very tough sledding and that’s sort of a lesson learned.
It’s funny because I was just thinking about this this morning because I noticed ⁓ that ⁓ Joe Cohen raised a bunch of money for this ⁓ micro mobility company, this electric scooter thing from Andreessen. And Joe came out of UPenn and ⁓ built this thing called CourseKit. And CourseKit was meant to be a replacement for Blackboard. And Blackboard is the most god-awful software.
Keith Cline (29:25)
Yeah, legacy.
Charlie O’Donnell (29:26)
Yeah, it’s the worst thing ever.
Keith Cline (29:28)
Might as well be mainframe.
Charlie O’Donnell (29:29)
Right, right. Exactly. And he wanted to replace the student and teacher facing like, this is our classroom homepage kind of thing, which like, yeah, it definitely needs replacing. But one of the conversations that I had with him early was like, no one in this ecosystem and this infrastructure gets paid for upside. No one.
It is like the last thing that any university IT person wants to do is rip out Blackboard for some startup that might not be around next year and have to re-educate all of these PhDs on how to use this thing and reset their passwords and all that. That person’s clocking out at five and you know.
And by the way, all I have to do is whatever Dean you think is the champion of your software, they’re to be like, I don’t know, there’s some security issues here. And then that’s the end of it. And that’s the end of that conversation. Right. So there are ecosystems that you can try to sell into that are highly resistant to change for non-economic reasons that I think this whole ethos of like move fast and break things, like doesn’t necessarily work very well at selling into schools.
sailing into governments, and many times recruiting and the recruiting infrastructure acts that way as well. Although, maybe in our new world, like in a, where we’re really, you know, pulling apart the whole employment infrastructure, maybe things will finally change.
Keith Cline (31:06)
Yeah, I mean, think certain pieces will, efficiency and making sure it’s not a fake apply, right? Like things like that. Like there’s definitely gonna be AI that’s injected into the stack, but it still comes down to a person reviewing something to make the decision to have the conversation. I think elements, like there’s too much throwing tech at a problem that doesn’t necessarily need a solution. So, but we’ll find out. All right, so then you continue down your path, which is how we.
finally met was at First Round Capital, which another fund that has kept consistent fund size like Founder Collective and like these firms that have done really well. I always thought it was interesting instead of swimming upstream and raising the billion dollar fund, they always kept it at that manageable level and in hindsight, brilliant.
Charlie O’Donnell (31:53)
Yeah, I mean, it depends what game you’re going after, right? So it’s like either you have $20 billion of capital under management or you should probably stick to, you know, south of $400 billion funds or whatever the right number is. Because it’s that middle that is the issue, right? Because everybody at Andreessen makes a bunch of money, right? They are an asset manager. They are going after the 2%.
you know, anything carry wise is gravy, you know, for them. I was actually thinking about this with the, what was it, $155 billion OpenAI round. And my first thought was like, are the asset managers that put that money in getting two and 20 on that? Like is that, that is crazy. Do you know how many days of war you could fund for that money? I mean, that is like, you know. ⁓
Keith Cline (32:44)
Right
Charlie O’Donnell (32:53)
$355 billion in a single round. That’s a lot of capital. So yeah, they stayed consistent. And actually, one of the things that I learned at the General Motors Pension Fund, we did a study of a whole bunch of factors of performance. Because we had been in like 350 venture funds over time.
we had a view of the market. One of the most consistent predictable factors for repeat performance, it was actually just doing the same thing that you did before. It was like, whatever thing you got good at, keep doing that. And then when you strayed, it didn’t work out, right? So like, like Summit and TA, like Summit.
Keith Cline (33:35)
Yeah. Right.
If it’s not broke, don’t fix it.
Charlie O’Donnell (33:47)
years and years of top quartile performance doing this like growthy later stage dial for dollars kind of thing, right? And then they raised like a summit accelerator fund that was an early stage fund and it totally tanked. mean, it was a mess, right? Cause that was not, the whole firm’s DNA and culture was built around being good at this one particular thing. And so like, if you’re a good pre-seed investor, it doesn’t necessarily mean you’re good at leading series A’s.
Which is, the way, when you go from like a $30 million fund to a $400 million fund, okay, fine. Your first check might still be pre-seed or seed, but 80 % of the capital that you deploy and the decisions you’re making are about round A, round B, round C. You’re just like a, you’re a series A fund with a kicker in the front. That’s what you are. Like you’re not a pre-seed.
seed fund anymore. so yeah, it’s like staying consistent in venture is really incredibly important.
Keith Cline (34:52)
So on your LinkedIn for first round, remember GroupMe was a big moment for New York Tech, right? So you were involved in, you have chief evangelizing investor, so unofficial, on LinkedIn. So what was the story behind that? Because I always remember that being kind of like a very fast deal too.
Charlie O’Donnell (35:12)
Yeah, so it’s actually even even like the story of how I got to first round in the first place was really quite funny. I had started this this company in the job space, which was like completely not working out. So here I am summer of 2009. It’s the writings on the wall. Like we’re going to run out of money. I got thirty four grand in credit card debt and I’m going to need a job soon. And Dennis Crowley reaches out to me.
and says, hey, we’re kind of struggling to raise for four square. ⁓ Would you kind of take a look at our deck? And I looked at it and I was like, dude, this is like the worst deck that I’ve ever seen. ⁓ So I helped him fix the deck. But I said, you know, before I help you fix this deck, can you send me the list of New York investors that you’ve pitched? This way we know who else we can pitch who, you know, haven’t been tarnished by this deck. And I was like, ⁓ this is like everyone in New York.
Like everyone’s already seen this. Like I don’t even know what we’re gonna do with this thing. And I was like, maybe would Yelp give you money? Like maybe they could do like kind of a Yelp Labs thing and maybe you can get 200K out of Yelp or something. And so I wrote this post that was like intended to be a shot across the bow of Yelp.
I said, I’ve something like I’ve seen the future of Yelp and it’s four square or something along those lines, right? And I was like, maybe I’ll maybe this will get a notice in there somewhere, right? And Fred Wilson, who did not take the initial pitch for four square, but heard about some game that Dennis had built. And by the way, Dennis had built dodgeball back in the day and this real world mobile game like way ahead of its time that he sold to Google for, you
Keith Cline (36:56)
⁓ that’s right. Yes.
Charlie O’Donnell (37:03)
not lot, not Ventrip dollars. And people were a little bit dismissive, right? They were sort of, ah, it’s another game. That’s all, you know, sort of key builds. And I wrote this thing that was like, no, no, no, it’s a way to like drive local foot traffic and all of this sort of stuff. So Fred’s like, oh, that’s pretty cool. I’m gonna check this out. So Fred’s blog has, you know, 100 X the traffic that mine does. So then he writes a post and links to mine. Like, oh, I’m testing out Foursquare, right? So.
his blog being the water cooler for New York and East Coast venture, like everybody starts signing up, right? And then MG Siegler, who’s a tech crunch at the time, he sees my blog and Fred’s blog and goes, ⁓ two dots, that must form a line. Foursquare must be the hottest company trending out of New York. And he literally writes it in tech, right? And the onslaught of venture capitalists to like the number of emails that I got, like, hey, what’s going on with Foursquare? It looks like New York is like hot again, new, what’s going on?
wait Foursquare is not in the valley this is this mobile social thing like this is what’s this doing in new york i’d like to guys only about that and so here i am seeing with ⁓ alex lines who ⁓ went on to ⁓ you know go work at notation and and hillary mason that that was no hidden door we’re seeing what our shitty little start up it’s not going anywhere that’s down to its last ten k and and and and money in the bank
celebrating the Foursquare party and everybody’s into it and literally the worst moment was I go to ⁓ NBC, NBC Local and there’s this guy Brian Buchwald who is one of the key folks behind Hulu and all of the networks getting together to do Hulu. ⁓ Last ditch effort, I’m like, maybe this could be like a local jobs thing and NBC could put this on their, I don’t know. I was just like.
Keith Cline (38:31)
Hmm.
Charlie O’Donnell (38:57)
trying for anything, right? And so clearly there’s no interest. He’s totally distracted, right? And goes, ⁓ you know who I’m meeting with next for lunch? Dennis Crowley. I found out about him from your blog post that I reached out to him. Like, you should come to lunch because you helped put this together, right? All right, I come to lunch and everyone’s like, isn’t Foursquare awesome? Like, isn’t this the greatest thing? Startups are cool. And I was like, what about our meeting? Nothing, right? So I come back to my office and I go to Alex and I’m like,
should we take this final 10K and put it into Foursquare? Everybody seems really excited about this thing and clearly we’re not gonna be able to do anything. I wish I had done that actually. no, I couldn’t figure out how to make the, it would have been very weird to explain to our investors that with our last 10 or 20K we were investing in this. So I was sort of in the middle of that whole thing.
Keith Cline (39:36)
is this how you did?
We’re investing in a startup. It’s a little awkward.
Charlie O’Donnell (39:51)
It became post 2008 financial crash, the deal that reheated the New York startup ecosystem because everybody thought we were dead. Because when finance, when Wall Street collapses, then New York collapses, right? No, apparently not. And here’s this founder building this consumer-y mobile social thing that it was like, wait a second.
You know, like the Black Knight, the not dead yet, basically, you know, kind of thing, right? And I got all this inbound, including from Bryce Roberts at O’Reilly Alpha Tech, who was early to poking around Foursquare, but had not given a term sheet because he was looking for a New York co-partner on this deal. And he was doing, I remember him saying, I was doing a code review and I was like, I can tell you what the code looks like.
Dennis wrote, it’s probably not good. It probably needs to be rewritten, but it’s working for now. And he’s like, dude, what’s all of a sudden, this is the hottest thing. This went from like a Nowheresville company to like, I might get cut out of this round. Like Fred’s looking at it, Josh is looking at it, all this sort of stuff. And I said, well, you got to get here. You got to come to New York. And it’s July of 2009 and I’m turning 30 on July 27th. And
I said, I’m 52 people out to Citi Field for my birthday. It’s a whole bunch of tech people and Dennis is gonna be there. When are you coming into New York? Because I’m coming in Saturday. I was like, no, no, no, you gotta get here Friday. I was like, you get here Friday, I’ll give you the ticket next to Dennis and you can hang out and you can secure your spot in that round. So I have this photo of our crew and Bryce is sitting right next to Dennis and he’s a plant.
He’s you know, purposely got
Keith Cline (41:49)
that’s hysterical.
Charlie O’Donnell (41:50)
him the seat right next to Dennis and he wound up doing half of that round along with the USB who part of the thing was he got term sheets for both USB and first round and Dennis was like who should I pick and I said well, you know first, you know, I’ve worked for Fred I did not know first round as well as obviously I do now and I was like, Fred’s up the street from you Josh is in all due to the West Conshohocken in Pennsylvania, why all things being equal? They’re both really great investors. Why wouldn’t you just pick the guy up the street? So that’s what he did. I got a call from Josh and Josh was like, hey, I heard you’re in the middle of that Foursquare thing. And I was like, oops. And he’s like, no, no, it’s, I mean, it’s annoying, but it’s fine. Like we need to get more plugged into New York. Like we have done a bunch of deals here.
People don’t know we’re here. Howard’s here, you know, ⁓ and Howard, know, Howard goes a mile a minute. Howard’s everywhere, at all places, at all times, right? So he’s there, he’s in LA’s, in Philly’s, you know. ⁓ he’s like, how do we not lose New York? And I said to Josh, you need a person here. Like a person who’s like embedded in the ecosystem. And…
Keith Cline (42:48)
Howard,
Charlie O’Donnell (43:12)
He’s like, what are you doing? I said, well, I got 34 grand in credit card debt and I’m going to need a job. And he’s like, okay, so, but we have four partners, we have three principals. There’s literally no room for you here. So like you have to leave at a certain point. Like there’s no, there’s no track. Like this is small fund. Your point before we’re staying consistent. We’re not growing the firm. ⁓ I said, sure, I will forewarn you. I’m going to try and make myself indispensable, but
Keith Cline (43:17)
Right?
Right, right. Yeah.
Charlie O’Donnell (43:42)
You know, ⁓ and I, so I was at First Round for two years helping them ⁓ find deals like GroupMe that I found at the TechCrunch Disrupt Hackathon. I hung out the weekend of the hackathon because I thought my job was be where people were building. So I could not code, but I went to the hackathon anyway.
And I was the sort of unofficial tester of all of the weird apps and things that people were building. And ⁓ it was a lot of fun. And ⁓ Josh Knowles, who was the VP of ⁓ engineering at Gilt at the time, had given me a heads up that Steve Martocci was going to the hackathon and building Group B. And I met Steven Jarrett there. And I was like, this is the coolest thing.
⁓ it was all text message based. There was no app. Right. So I come into First Round and, ⁓ I signed everybody up to a group me group. It was so early. There was no way to get off of a group me group. So once you were in the thread, that was it. You were stuck. So the whole team’s out at Ted. They’re at the Ted conference. And these are guys that, you know, they’re what is now my age at the time.
Keith Cline (44:56)
That’s it.
Charlie O’Donnell (45:07)
who don’t text a lot and they’re sitting at the tech conference and all of a sudden their phones start blowing up with a reply all of text messages on a GroupMe group and Josh is like, what the fuck is this? Josh literally wrote back, unfucking subscribe.
Keith Cline (45:22)
What is this?
Charlie O’Donnell (45:29)
And I couldn’t get him off of the thread. There was no way to get him off of the thread. I was just like, guys, just stop texting. And Chris Bailey goes, what is this? was like, ⁓ this is the worst. And Brett Berson is sitting across from me. was in New York at the time. He’s like, that’s dead. You killed that. I was like, no, man, I really think we should really be in this. And he goes, there is no way you are pulling this out of the jaws of death from Un-Fucking-Subscribe. Like Josh said, Un-Fucking-Subscribe, this is dead, this is a dead-a-deal. And what I wound up doing, I don’t think I’ve been super public about this, is I sent it to Betaworks, Lerer and SV Angel. I think maybe the Betaworks guy sent it to Lirr, one of those two. I sent it to Andy Weissman, who was at Betaworks, and I sent it to the SV Angel guys.
And I said, we’re really excited about this here. And it’s, know, couple guys at a hackathon, like, you know, it’s like that kind of story. You should take a look, right? And they all got really excited. And then they’re like, cool. So like, let’s all do this together. And I’m like, I have nothing behind me. Like they have literally called my bluff on this.
Keith Cline (46:25)
Ha ha ha ha ha ha
Charlie O’Donnell (46:46)
And we were the first ones to it, but the last money in. And at some point I go back to the first round guys. I’m like, yeah, I may have said that we were really excited. And it’s all of these funds we said we really want to work with and they think it’s cool. And so we should do this. And ⁓ it got to a two, two tie and Josh could break ties at the time. ⁓ They have a whole very.
complex voting structure now that is like they have a decision science person that’s like crazy town. and I really like hammered, I was so obnoxious when I was there. I was not a good team person at all. And I was such a bull in a China shop. And I really, I bristle at what that email to Josh must’ve looked like to try and convince him to break the tie. And the interesting thing was in that portfolio, we looked back at that portfolio said, you know, it doesn’t look like there’s a really big winner in fund two. Like it looks like we have a lot of very solid companies, but like maybe we should ramp up the risk and throw, you know, a little money at a mobile social all or nothing kind of bet. Well, Roblox isn’t that fun actually, but Roblox didn’t take off for a long time. Roblox was like, for a long time until it blew up. And so, yeah.
Keith Cline (48:02)
⁓
Charlie O’Donnell (48:10)
like GroupMe was a flyer at the end of that fund. And ⁓ it was a heavy handed burning social capital kind of deal for not only saying that we were probably interested when we really weren’t and then, know, ⁓ poking Josh about it, but he caved ⁓ and ⁓ they sold a year later for like 70 million bucks and it wasn’t you know the whatsapp deal but it was it was the it was the next hotness after Foursquare in in New York and they took over the next south by ⁓ at the time and it was was it was a fun ride
Keith Cline (48:52)
Yeah, I mean that was a legit outcome at a very quick pace that made TechCrunch. But now obviously that would be like, what? But the other company that just because the Boston Ties was Backupify and Rob May and that was another company that I worked very closely with and had Rob on the podcast. I don’t know, probably 150 episodes ago or something like that. But we talked about the history.
Charlie O’Donnell (49:17)
You know, that was my idea.
Keith Cline (49:19)
I want to say he talked about it and he brought you into the conversation. I forget, I’d have to listen to the episode. So what was the story there?
Charlie O’Donnell (49:27)
So I tweeted out that after Yahoo’s acquisition of Flickr, that I didn’t think they were, I feared the day where I got the email from Yahoo, who is now running by, run by Jim Lanzone, who’s an old school tech guy, who’s a really terrific guy, who’s turning that ship around. It’s now weirdly like the new hotness among Gen Z, or like it’s like cool.
Keith Cline (49:55)
Yahoo is?
Charlie O’Donnell (49:55)
Yeah, it’s like cool for Gen-Alpha or Gen-Z or teenagers to have a Yahoo address now. Yeah, there’s like a whole thing around it. Yeah, nostalgia, like 90s nostalgia is a big thing. And so that’s the apparently Yahoo email accounts is a big, thing. I tweeted out something like, I fear the day that Yahoo sends me an email that is like, we didn’t lose your photos. We just don’t know which ones are yours. You know, and so
Keith Cline (50:00)
I didn’t know this. Okay. Okay.
Got it.
Yeah.
Charlie O’Donnell (50:24)
How do I, like my Flickr photos only exist in the cloud. I don’t like being tied to one company, to a hack or to a break. Like how do I back up a thing in the cloud that’s not like a tangible file, right? And so Rob responds, like, oh, that’s easy. We, you know, sort of, you know, there’s an API, there’s Amazon S3. He had a couple of guys in the Ukraine, like hack something together.
and he started this thing called LifeStream Backup. And it was this, you know, more for social media, but what he wound up stumbling into, which was not part of my initial idea, a whole bunch of municipalities were on Twitter and Flickr and starting to experiment social media, and they had record retention requirements. So they had to, by law,
Keith Cline (51:15)
Okay.
Charlie O’Donnell (51:19)
maintain a backup copy of everything that they had written. So we started getting traction and people started coming to him with Salesforce implementations. How do we back up our Salesforce? Because there’s no files, right? And we have to back up structure and then it was like Google accounts. So that is ⁓ a thing where we were all probably a little bit skeptical and the market just really pulled him into that company. And credit for
Keith Cline (51:27)
Right, yes, I remember that.
Charlie O’Donnell (51:47)
Rich Levandov I’m sure he credited in the, who just kept writing checks into that company. we were like, infrastructure was so much more expensive then than it is now. And we were burning money very quickly on all of these backups. when nobody else necessarily wanted to fund it at key moments in the company, like Rich was right there with another check and ultimately wound up getting a good exit out of it. So yeah, yeah.
Keith Cline (52:12)
Yeah, Datto, right? Yep.
Okay, and then you went off to start your own fun.
Charlie O’Donnell (52:19)
Yes. Brooklyn Bridge Ventures. The first venture capital fund located in Brooklyn, which to me was like a little bit of a marketing gimmick, but I had so many people being like, would you do a Manhattan deal? I was like, yes, of course. The idea that you could build a fund, you probably actually could build a fund of only Brooklyn residents.
Keith Cline (52:35)
You
Charlie O’Donnell (52:44)
because Brooklyn has 2.6 million people and Manhattan only has 1.8, so you totally could do that. But Brooklyn had not, it was not quite the center of the community. I there’s plenty of companies being built out here now. But yeah, I broke out on my own, because as I said, there was nowhere to go at first round. also, Josh has said to me, you should go do this, but you should go do this by yourself and I’m not a great team guy as much for as much as a, I’m a community person on my own team. I don’t know how Vanessa puts up with me. ⁓ but I, I am not a great manager. I like doing my own thing. probably would have been good in a place like.
like a founder’s fund or something like that, where like clearly they have a bunch of big personalities and I don’t think anybody at founder’s fund is telling Keith or whoever that they can’t invest in a deal. I think they’re all probably doing their own thing. ⁓ And ⁓ I raised three funds, three small ⁓ micro funds, I did 105 deals and ⁓ learned a ton. I felt very smart coming out of First Round because I had done nine deals there, two of which exited in the two years that I was there. So ⁓ GroupMe and SinglePlatform Yeah, yeah. So like a double-O agent, had my two kills and ⁓ I went off and raised a fund based off of that. ⁓ It turns out to be a lot harder than your first nine deals getting two exits in the first two years. ⁓
Keith Cline (54:14)
Yep, constant contact, right?
So
easy.
Charlie O’Donnell (54:35)
It’s so easy. Everything I touch turns to gold, right? ⁓ And ⁓ yeah, I have taken all of the lessons over the last three years and I’m sharing it in two big ways. And one of them is I am ⁓ coaching VCs. And so I have a VC coaching practice that I am working with a bunch of emerging managers or
⁓ principles that, you know, brand name funds and trying to make their way to partner and it is really, really rewarding to ⁓ be able to impart some of what I learned at two of the best funds that ⁓ have ever been raised and all of the work I did as a solo GP and raising from LPs and all of that other stuff. ⁓
And then the book and then the Founder Unfriendly which is… ⁓
sort of a spin on the founder friendly. ⁓ And I have often been referred to as Simon on investor pitch panels. And so I really kind of pull no punches on feedback. ⁓ But as I was telling you in the beginning, I really feel like so much of the content out there is ⁓
you know, about the headline successes, right? Here’s how Harvey grew to a whatever, $10 billion valuation in 18 months or, you know, all of this sort of stuff, right? It’s not relevant to a founder who’s just trying to figure out how to get off the starting block, right? How to decide whether or not they should even take venture. Or I’m talking to college students and they’re like,
Keith Cline (56:15)
Mm-hmm.
Charlie O’Donnell (56:33)
How do you pick a problem to work on? Right? And you can listen to, you know, Marc Lore you know, about all of his successes. And like, I don’t know if there’s going to be, you know, something in there. And certainly like, I think somebody like that would have a good piece of advice for that student. But I don’t think anybody asks him for that advice in a way that is usable to the 99 % of the people in the crowd who are struggling to raise, right? And that’s gonna be most people, the people who didn’t just exit a big company. And I had one of my portfolio founders look at the story of Figma and I say, how did Dylan get $3 million right off the bat? And I said, well, he’s a Theil Fellow who worked at an index Ventures portfolio company beforehand and board members sort of walk through the company and the founder of that other company would point him out and say, keep an eye on this kid, right? He’s going to go far. He’s the smartest person we got here, whatever. Like that’s not starting in the same place as some, you know, Oklahoma City founder who doesn’t know any VCs or whatever. Like to think that you were starting from the same position.
And you are a comparable company in that, you know, when the starting place is that different is just not true at all. And so the book is about like, okay, given that let’s accept the reality that you are not the same positioned founder. Like you could have the same intellectual horsepower, you could have the same grit, right? But you’re not in the same spot in the ecosystem. Then what? Like how do we get over that? How do we spend most of our time trying to close the gap without spending all of our time complaining about it, because we can’t do about it anything in this pitch meeting that you’re in right now. And so sometimes that’s hard to hear, and that’s the unfriendliness of the book. ⁓ But I think the right founders appreciate it, because they don’t really get feedback otherwise. And it’s very tough to get feedback from VCs in this process.
Keith Cline (58:55)
I do think raising capital is almost like a badge of honor, but there’s so many companies that don’t need venture capital, right? So how do you advise entrepreneurs on that path of is your company venture fundable? Should you raise capital? Why not to raise capital?
Charlie O’Donnell (59:13)
Last night I was on a panel and it was a really great talk put together by ⁓ Cat from the Fourth Effect and they’re doing a lot of stuff around matching startups with advisors and board members. And so somebody in the audience asked the question, how do I know what’s the criteria for being venture fundable? And I said, how many people here are okay if their company goes to zero and two people raised their hand. And I was like, nobody else besides those two people should raise venture funding. And there’s the look of bewilderment on the audience. What? Why would you? Right, right. And I said, because here’s what happens when I come along as a VC. I write a check and I up the upside.
Keith Cline (59:52)
Yep. Yeah. Like, what? What do you mean? I thought we were going to grow this and out come and.
Charlie O’Donnell (1:00:09)
Right? I raised the bar for how far we can go with this thing because I’m putting in growth capital, but I also turn up the risk to 11. And I am definitively going to increase the chance that this is a zero. Unless you, that is one of the, I think it’s in the first chapter of my book. Unless you can sit there and be okay with this thing being a zero, you should not raise.
And that doesn’t mean like you’re happy about it, right? Like no one’s happy about it, right? But if you, for example, venture as a financial product, if you are in a financial position where you cannot afford to spend the next five years of your peak earning years on a thing that has a zero equity outcome, this is not the right financial product for you. Okay, like this is, you know.
Somebody pitched me something where I would be tied up in illiquidity for the next 10 years. I was like, dude, I got enough of that. ⁓ I’m in the real long tail in all my funds. Illiquidity is not right for me if you are selling financial products to me much in the same way that there are certain founders in a position where ⁓ this level of risk is not a good financial product. You know who told me that actually?
⁓ Jewel Solomon from Collab Capital. We were having a conversation about ⁓ the disparities in funding among ⁓ black founders and female founders. And ⁓ Jewel is terrific. She’s ⁓ founder who bootstrapped and sold a company to Amazon. Probably not a huge outcome, but…
you know, good out, good solid outcome. And in explaining this to me, she said, you know, ⁓ after I sold the company, I bought myself a house and I bought my parents a house and nobody in my family had owned before. And after that, after ensuring my financial stability, then I went out and took the risk of starting a venture firm and I was in a position to wrap risk up. And she said,
You know, listen, the average ⁓ black person in the US, like on average has a negative net worth. And so how do you square that financial product with taking away a person’s peak earning years and possibly winding up with a zero? Like those two things don’t match, right? And so that is one of the reasons why she ⁓ offers ⁓ different types of
funding that squares with people in different financial situations, like revenue-based financing. Financing that allows people to hold onto a business multi-generationally that doesn’t have to give it up if it’s a success and can pay their way out of having a VC on a cap table who would like the upside.
Keith Cline (1:03:11)
Yes, amazing, yes.
Charlie O’Donnell (1:03:31)
but doesn’t need it and isn’t willing to run a company into the ground to get it. ⁓ And so that’s another thing that I sort of bring up in the book a lot is there’s a is venture right for this company, but is also is it right for you and what position are you in? ⁓ And that’s something a lot of people don’t think about. And I think it’s important to sit with. Now, that being said,
there are other people who are like, I’m in a position where I want to spend the next couple of years swinging for the fences. And if I was in a nicely growing, somewhat cashflow generating thing and I watched myself get lapped by people who are not as smart as I am, that would frustrate the hell out of me. And I want my shot.
That is the approach and that is the mentality that you should be taking when a ⁓ middling outcome or an okay and stable outcome is not what you were looking for because that’s what venture does. And then you get into the world of venture math, like how big is big? That’s one of the things, and this goes back to the unfriendliness. It is really hard to talk to someone who has a big idea,
that it is big for them, it is big relative to everything they have seen in their life, and to tell them, not big enough. That’s offensive. What a jerk I am for saying that your idea, the biggest idea that you’ve ever had in your life is not big enough. That sucks. I’m such a jerk for saying that.
Keith Cline (1:05:06)
you
Mm-hmm.
Well, when
You think about like the, you so you scale and you grow something, right? There’s two parts of this that I wanted to get your thoughts on. what you just said, let me think, like there’s potential interest in acquiring your company, but it’s not a large enough exit for the fund to matter to the fund. They’re like, no, we’re going to go deeper. What should entrepreneurs think about that are protections that they can put in place? Because I’ve Nigel Eccles from FanDuel was on my podcast and
That Fanduel is a major brand out there, that’s a big company, but the founders don’t always benefit from their effort. So what should founders be thinking about to protect themselves?
Charlie O’Donnell (1:05:59)
By the way, do know we got that pitch when we were at Union Square and it was FUBnub? I got the FUBnub pitch. FUBnub was this little sort of like, can bet against anybody on anything. It was a little more Kalshi-like but they didn’t have the sort of the whole marketplace thing. And ⁓ Nigel was like, hey dude, take a look at this. And I was like,
Keith Cline (1:06:03)
No way. Really? No. Fubnub.
huh.
Charlie O’Donnell (1:06:29)
What is this? And I think actually to be this really full circle, ⁓ I think I made a bet on Fubnub against Fred Wilson that the Jets were going to lose their opener one year. Literally probably one of the first 100 bets on anything that eventually became Vanduul. Yeah, there’s a needling Fred about the Jets ⁓ thing on Fubnub. I wonder if I had the email confirmation on it.
Keith Cline (1:06:30)
Ha!
Yeah
That’s funny.
Charlie O’Donnell (1:07:00)
But yeah, how do you, the question was how do you sort of protect yourself against that? ⁓ so I think, first of all, the venture flywheel, people treat it like it’s something you can’t get off of. And that is not true.
I have a portfolio company that raised a pre-seed circa 2017, single digit valuation, those were the days, and a seed that I think the post was like 16, didn’t raise again until a private equity firm came and bought us 90 % of our shares off the cap table at a price of like 160, I’m going to say.
14, 15x return, returned 40, 45 % of my fund. Great outcome for a small fund, right? At not a big number, 160, right? How many deals, think about all the angel investors out there, what percentage of your deals are doing 14, 15x or more? Not many, right? You can get that deal because he didn’t raise in between the seed and that round. He still had money left in the bank and…
Keith Cline (1:08:17)
Right. Yep.
Charlie O’Donnell (1:08:28)
still running the company. They’re off acquiring other companies and doing, he’s gonna get another turn out of this thing because they’re sort of a growth trajectory now. That’s really ideal, right? If you can, understand that not everything can be bootstrapped. And this is like somebody came up and saw this term about a year ago, seed strapping. It is raising just enough to get in the game, to get.
Keith Cline (1:08:34)
Mm-hmm.
Charlie O’Donnell (1:08:57)
Some aspect of a flywheel turning in a real product. Because despite all of the AI, vibe coding, like you sell to enterprises, you need a real product. You need to go through a SOC 2 and all that stuff. Like, yeah, stuff’s cheaper, but it does take a couple million bucks to build something real that, you know, is not going to be exposed as fraud in the New York Times or anything else like that. And so, ⁓
But just because you do that doesn’t mean that you need to raise a $50 million A and a $200 million B and all this other stuff, right? And you raise the bar where the only way that anybody makes any money is if this thing sells for $3 billion, right? So like most outcomes are south of $200 million. And so to fund yourself appropriately, to give yourself the option, right? It reminds me of…
Wiley Cirilli, when he built Single Platform, which I had funded at First Round ⁓ he raised a seed and a $3 million Series A. And that’s going to be 2011-ish, maybe 2010. And then he had an offer for a B to take, I think it was $16 million from NEA. ⁓
and he called me up and he said, what do think I should do? I said, okay, are you asking whether I think you could take the $16 million and build something that’s worth $500 million? Yes, I have all the confidence in the world, in you. Are you asking me to tell you as a person who still owns more than 50 % of the company whether you should turn down $100 million acquisition?
No, I’m not telling you. In a million years, ever tell anybody that. This is your decision to make, and you wound up selling after two years. I haven’t actually asked him that question, but I can’t imagine he has very much in the way of regret. Just having ⁓ the optionality.
Keith Cline (1:10:54)
Hell no.
Yeah.
Charlie O’Donnell (1:11:21)
is really helpful and I think it is very difficult, particularly in a downturn, to be in a position where you don’t have optionality. ⁓ Where you’re just like, we can’t lower our burn or sort of get over our skis. And I think that’s really hard. ⁓ So I think you need to be upfront with your investors about that. I think that’s why it’s interesting
to have smaller funds around the table. That’s actually an argument that I used to make all the time. A really small fund, a $15 million fund. Which is not nearly as small today as it was back then. And ⁓ one of the reasons why people would hesitate to put me around the table is there was this deep pocket thing. Well, what if things go wrong? It was nice to have a deep pocket around the table.
The reality is, if you have deep pockets around the table and your company is not performing, they’re not gonna fund this thing forever, right? And it’s almost gonna be worse because people know that there are deep pockets around the table and they’re not funding your A and you’ve gone sideways and your metrics are all over the place. So when they give in their token, well, know, if you do a bridge, we’ll put in just our pro rata, like everybody knows what that signal is. You know, when you got…
Khosla Ventures around the table and they’re like, we’ll put in another 250K. Like you might as well sell the company at that point because everybody knows the signaling risk.
Keith Cline (1:12:59)
Well, Charlie, I could talk to you for hours. We could do like a two day marathon podcast about so much storytelling. I’m just a sucker for history and tech stories of how things came together. So I could talk all day long. But I do, by the time we publish this, your book will be available. So Founder Unfriendly, what investors won’t tell you about getting funded, go pick it up on Amazon and all the major outlets. I’m sure it’s available there and congrats on writing the book. Cause obviously that’s an accomplishment in itself.
Charlie O’Donnell (1:13:17)
Yes.
Thank you.
Keith Cline (1:13:29)
a writer, an OG blogger, so I’m sure it must have been somewhat just natural for you, but it’s still a process, right?
Charlie O’Donnell (1:13:37)
Hardest thing about it was I’m used to writing in certain sizes and managing an entire like 250 pages of like, I had my wife read the first draft and she’s like, you know you told this story twice, right? And I was like, ⁓ actually I, you know, managing the whole thing. ⁓ Before we go, I do want to make an offer to ⁓ folks who’ve made it this far.
We have put together a really, really outstanding ⁓ series of live virtual AMAs. And there’s eight of them so far. We might add another one. Co-founder of Data Dog, Zero Hash, Movable Inc., ⁓ Audrey Gelman from The Wing, talk about a roller coaster, really Rob May, and ⁓ anybody who buys the book and emails the receipt to founder unfriendly at next NYC We will invite you to that series which we’re doing over May and June and it’s eight sessions so for the cost of a book the ROI is very high on that and Yeah comes live ⁓ April 28th, and so we’re doing all the pre-sale marketing and everything and ⁓ really excited about it. It was it was fun to write and really excited to enable me to have all these conversations and a good excuse for us to catch up.
Keith Cline (1:15:04)
Well thanks again for your time and all the great stories.
Charlie O’Donnell (1:15:07)
Thank you.
