Episode Summary
Executive Summary: Harry Stebbings interviews David Waxman of 10110 Ventures about the transition from founder to VC, the craft of early-stage investing, and LA’s growing tech ecosystem. Waxman argues that TAM is often misleading, prefers equity rounds over notes/SAFEs and lead investors over party rounds, warns of pro-rata and LP co-investment complexity, and stresses doing diligence on investors as if choosing a long-term partner.
Main Topics: From founder to investor (Priority: 5/5): Waxman explains how repeated founder “ultra-focus” evolved into active community engagement, angel investing, and finally VC, which he finds less emotionally intense but still deeply involved. VC as a craft: subjective inputs, objective outputs (Priority: 5/5): He frames venture as a craft because early-stage judgment is highly subjective, yet success is ultimately measured by objective returns (cash-on-cash and IRR). Why TAM can be misleading (Priority: 5/5): Waxman argues that traditional TAM analysis misses companies that expand or redefine markets, and that founders should instead communicate ambition and market-creation potential. Deal mechanics: equity vs. notes/SAFEs and party rounds (Priority: 4/5): He prefers priced equity rounds for clarity and governance, dislikes large convertible notes and SAFEs for leaving key terms undefined, and sees party rounds as lacking needed leadership. Pro-rata rights, co-investments, and investor complexity (Priority: 4/5): Waxman says pro-rata rights have become harder to manage because of more funding layers and SPVs, creating conflicts between early investors, new leads, and founders. Founder diligence on investors (Priority: 5/5): He argues founders should reference-check VCs, including off-record conversations with portfolio founders who experienced failure, because investors are effectively long-term partners. LA tech ecosystem and data-driven investing (Priority: 3/5): Waxman highlights LA’s broadening tech scene and discusses data as a moat, citing Motion/behavior analytics company Velocity as a recent example of context-aware investing.
Key Arguments: Venture is a craft because it combines subjective early-stage judgment with hard performance metrics; different VC styles can lead to different paths to the same outcome. TAM slides are often “foolery” because they rely on static market sizing and miss companies that expand the market itself. Founders should communicate their true long-term ambition and how they plan to move from a sensible initial wedge to a much larger opportunity. Priced equity rounds are preferable to large notes/SAFEs because they force important governance decisions early instead of deferring them. Party rounds are problematic because they often lack a clear lead investor who can coordinate through hard situations and bridge moments. Pro-rata rights have become more contentious due to tighter ownership thresholds, more investor layers, and the use of SPVs as separate investable assets. LP co-investment rights should not be contractual by default; founders should evaluate LPs directly before allowing them onto the cap table. Founders should diligence VCs with reference checks, including talking to founders who had bad experiences, because investor behavior during adversity matters most. LA is a genuine and expanding tech hub, not just a media city, with strength in aerospace, VR, drones, and university talent. Finance is prospective while accounting is retrospective; CEOs must always know cash runway, burn, and next month’s revenue. Waxman believes his fund may be taking too little risk if its loss ratio stays too low, because top VCs often accept more losses in pursuit of outlier returns.
Data Points: 10110 Ventures first fund: Raised in 2014 - Waxman describes the shift from an informal investment club to a formal VC fund. Firefly sale: Sold to Microsoft in 1998 - Waxman’s first company pioneered personalization and privacy technology. PeoplePC IPO: Went public in 2001 - Waxman’s second company before being acquired. PeoplePC acquisition: Acquired by EarthLink in 2002 - Outcome of Waxman’s second founding experience. Uber market expansion example: Black car industry / taxi industry / tens of billions - Used to illustrate how market size can be underestimated. JoyMode example: Camping, movie night, snowplow access without ownership - Illustrates the trend toward access over ownership. A-round example: Battery Ventures and Index Ventures co-led in 2006 - Used to contrast older financing norms with today’s stricter ownership thresholds. Loss ratio: Fund one extremely low - Waxman says it worries him because it may indicate insufficient risk-taking. Motion data company: Velocity - Recent public investment focused on human motion/context analytics. Pocket springs in mattress ad: 2,500 - Sponsor read for Simba Hybrid mattress. Sleeping trial: 100-night sleep trial - Sponsor read for Simba. Warranty: 10-year guarantee - Sponsor read for Simba. Warranty: Free five-year warranty - Sponsor read for Raiden luggage. Uber credit promotion: $25 - US Raiden promotion with code 20VC.
Pivotal Quotes: "you have the baby, but you get to give the baby back" — David Waxman: Describing the emotional distance of being an investor compared with being a founder. "TAM foolery" — David Waxman: His shorthand for why static total addressable market slides often mislead investors. "I think that's really important. Talk to off-record references." — David Waxman: His advice to founders doing diligence on prospective investors.
Implications: Listeners should think less about static market sizing and more about ambition, market creation, and investor quality. For founders, structured equity and clear lead investors matter; for VCs, diligence, governance, and risk-taking discipline are key.