Why Pre-Seed Isn’t Just Small Seed - Charles Hudson’s VC Playbook

There's a great founder out there who doesn't know who I am. Where are the people we want to find? 60 to 70% the person and 30% the market. Like 0% product. Pre seed is where seed was 15 years ago because the universe of people who could make it happen was small. Starting a company is not something one should go into. Like.

At Context Ventures, our podcast Advancing vc covers all things startup and venture capital, primarily how startups and venture capital are changing from the emerging manager perspective. We chat with venture capitalists, limited partners and founders who are actively working at the frontiers of our industry and are advancing venture capital. Today. I'm delighted to have Charles Hudson of Precursor Ventures join us. I've known Charles for several years, actually. First met him when I was a GSB student and he came in for mentor hours. And I'm very delighted to ask him about his career, his journey, and where Precursor Ventures is headed. Charles, thank you.

Thank you for having me.

Charles, can you talk about your path to venture? I'm tracking. You were first at In Q Tel.

Yeah.

Then Softech, and then you started Precursor.

Yeah. So it's funny, I started my venture career at In q Tel, the CIA's venture capital group, when it was still relatively nascent. So I started working with them in 2000, and as is the case with all venture internships or all jobs, I got that job because I had had a different internship. I'd met somebody who was very close to the In Q Tel team, and before I went to go do an investment banking job, she encouraged me to go interview at In Q Tel. And I took the job. And so I spent a lot of time flying from San Francisco to D.C. and as I was telling one of my teammates, when I took that job, I was 22 and this was before the days of Uber and Lyft, so. So I would take a taxi to the CIA for all of my meetings cause I was not old enough to rent a car. And so it was a great experience. Learned a ton about the intelligence community, learned a ton about government, learned a ton about vc, but also wanted operating experience. So took some time off, went to business school, worked for a company called Ironport Systems with some really fantastic founders and a great team. Went and spent some time at Google, worked in games for a while and then wanted to get back to venture. And so connected with Jeff Clavier. Joined SofTech when it was Softech, before it was on Quark. We had a great run there. Invested in some fantastic companies like Postmates, Poshmark, Vungle Fitbit, Eventbrite, LaunchDarkly and many others that I think will eventually become amazing companies. And it was just a fantastic experience. But when I joined Dunkork, it was just me and Jeff. It was a little tiny fund. I always joke with people. We were doing seed investing then which would really be pre seed today. These were 500k checks to pre product market fit. Pre launch companies and seed has changed a lot in the last 15 years. And so I left Uncorked 11 years ago to start Precursor because I felt like that first generation of micro VCs and super angels had really pioneered our asset class. But they'd all grown to a place where they weren't really taking primary risk on new people who are pre product market fit. They were doing something different. I said there always has to be a firm that's focused on those first checks. I know you believe this. Those first checks of 250 to 500k to really raw ideas where you're going to help people go from zero to one. And that's the work I was passionate about. And it felt like unqork was becoming a bigger, more institutional seed firm that was solving a different problem in the ecosystem.

So many questions from just that that I want to unpack. The first is in Qitel. So right now defense tech and dual use is all the rage. Maybe too much, maybe too heated. And I'm curious, given your in Qitel experience, have you been doing some defense tech dual use? What's your thoughts on that space?

We've been creeping our way back toward it. If you had told the 2021 version, the 2001 version of me, that dual use in defense tech would be this hot, I would have never believed you. It was such a hard lift at In Q Tel just getting startups to think of the government as an attractive customer. And I give some, you know, some credit to Anduril, some credit to Palantir, and to see the shift has been surprising to me. I think maybe some of the folks who are rushing into this don't fully understand how government contracting and government procurement works and the cycle times for some of these projects. But we've made a handful of investments that are focused on that theme.

And then Stanford Business School, we're both alums. What's your favorite course?

It's funny. I teach at the GSB now, so I won't pick my own class even though it's my favorite. If I think about the class that probably is funny. I tell people the class that has had the Most impact on my thinking was managing growing enterprises with Joel Peterson. The class I probably used the most was the class I took called Incentives and Productivity with Eddie Lazear. And the whole point of that class was designing economic incentive systems to drive behavior. And a lot of the things I deal with with startups are internal incentive systems and like the things that can go wrong based on what they're trying to get people to do. So those are two classes I really lean on a lot of.

When people say incentives, I think of it's either a Warren Buffett or Charlie Munger quote that is, show me incentives and I'll show you outcomes. And I think that applies so much in the startup space and in venture capital. Now let's talk about Uncork or softech. And you mentioned they were doing seed. I believe they still classify themselves as seed investors. And whereas you do pre seed, I feel like pre seed is what seed was five years ago. I think you just said that. And what a was 10 years ago. Is that a good read or not?

I think it's right. I think when I got into seed investing in 2000, most of the companies had no product. They were mostly first time founders and they were generally, I mean, when I was at Uncork, a big seed round was 2 million. If you're raising 2 million, we're like, ooh, that's kind of a lot of money. Could you do it for a million? Could you do it for a million and a half? And now a big seed round is 10. And so I think in a lot of ways seed rounds look more like series A's than they do old seed rounds. And in a lot of ways pre seed has filled the gap of what seed used to do, which is that first call it half a million to $2 million. That's really designed to build something and convince investors that the world wants the thing that you want to build. I think it's been very fascinating, but I used to, in the beginning of Precursor, tell the seed people, come up with a new name for what you all do. What you're doing isn't really seed anymore. But they didn't really want to let the name go. So I think we needed terms like pre seed. And now I meet people who are like, oh, I'm pre. Pre seed, like the south park common folks, negative 1 to 0. And I think as venture becomes a more mature asset class, you find more specialization based on where people want to get involved with companies.

I had a conversation this morning with an LP who said that they Felt Pre Seed was like a perfect market. They were like, it's almost like the public markets. And I pushed back heavily. I was like, I disagree strongly. I'm curious what your point of view is.

I think it's the least efficient part of the market for a couple of reasons. If you think about Series A companies, we won't go all the way to growth. Growth I think is actually hyper efficient. If you think about Series A companies, those companies leave all kinds of footprints on the Internet. You could. They're in har. If you have Harmonic, you're going to find them. They have.

You're an investor in Harmonic.

Yeah, I wish almost. I wish I were investor in Harmonic.

Sorry they had an event with you.

Yeah, we do a lot with them. We're big fans of the product, the Series A. If you get to Series A, chances are you've got one or two prominent seed firms. You're on their website, you're in pitchbook. People know the landscape of companies that are competing it at Pre Seed. Most of these companies, I tell our LPs they leave no footprints on the Internet. I don't know about you, I feel like half the people I meet are emailing me from their Gmail address. There's no corporate domain, there's no crunch based profile for the company. All of the metadata you would use to find these companies doesn't exist. Also the founders, I find they don't even know the landscape of investors they should go talk to. Because Pre seed is the highest churn part of the ecosystem. Some of that churn is positive. I think about a firm like A4 which started off very small and it's now almost $200 million fund size. Their model has changed a bit, they've graduated and grown up and unfortunately some people don't make it in Pre seed and they turn out of the industry. So if you're a founder at any point in time, it's the most turnover of investors and no Pre seed investor I know sees every Pre seed deal. It's not possible. It's also the bottom of the funnel. It's the most companies, depends the bottom of the pyramid. Top of the funnel. Whatever analogy you want to use. I tell my team all the time we see 10,000 companies a year. I don't know what fraction of the Pre seed ecosystem we see. It's not 100, it's not even close. And so what I tell people is it's the least efficient part of the ecosystem because the companies are the hardest to find. The judgment is highly Subjective because there's no metrics you're not looking at trailing MRR or those things. And the founders are the most fickle because a lot of them are first time founders and they're trying to figure out what do I want out of a capital partner. So I'd argue it's the least efficient part of venture and that's why you can make money, because it's not efficient.

I totally agree there. Sometimes when I tell people what I do, I say, at Pre Seed, I say, no product, no customers, no revenue, no code, no problem.

That's right. It's like the old no shoes, no shirt.

Yes. For some of our investments, to your point of like negative 1 to 0, we're talking to them before they're leaving their company. They're like, I'm thinking about leaving the company. And we're not trying to have companies lose people, but we're like sometimes like, no, you should stay at your company. But sometimes we're like, oh, we would fund this.

I mean, I've looked at things with you where the people are like very, very early. And I think this is the real premium. And this is the thing. I talk to LPs about the number of people who are really willing to bet on a person who they don't know professionally or socially, who doesn't have a product. I think half of those people are on this podcast right now. It's like me, you and a handful of people. And I tell lpl, how do you do it? I go, well, if you meet enough people and you have a point of view of what success looks like, it's very easy to separate the people who are likely to succeed from the people who should stay at their job or spend some more time thinking about their idea. I find it very difficult for LPs to understand what we do.

I agree. And I think of when I think of Pre Seed, we mentioned A four Hustle Funds Everywhere Ventures. And then I start to. It gets harder.

It's harder. I think about Dustin at Wonder down in la, a more concentrated model, but definitely focused on Precede. But there's just not a lot of. When we're trying to syndicate, there just are not a lot of people who's, you know, the core part of their diet is Pre Seed.

That's right. And so this morning I was pushing back with the lp. I was saying there are a lot of people in Pre Seed because your friends and family can invest in this round, but who can catalyze the round, who can actually say, this is what the valuation will be, this is institutional grade. There's only a few pre seed funds that do that.

Yeah, it's funny, I always tell LPs, they go, well, pre seed feels crowded. I go, okay, name name funds that could lead a $4 million seed round. And you know, after they name 20 oh box group uncor, they'll I'm like, okay, cool, we could go on for an hour. Name firms that could lead a million dollar seed round with a 250 to 500k check. They get about five or six names in. Sometimes they know 43. You know, Dustin is. But after about five or six names, they struggle. I'm like, that's why there's an opportunity here. Because the universe of firms that can actually do that. And the irony is when I got into seed, there were only five or six firms that could lead a seed round. It was Uncork, it was Floodgate, it was Felicis, it was True Ventures. There were half dozen of Layer Hippo. There were not that many firms in 2000 that could lead a seed round. So leading a seed round and catalyzing it was a big deal. And now there's probably 150 really good firms that could lead a seed round. And so I keep telling my LPs, pre seed is where seed was 15 years ago. And that was some of the best returns we saw from seed because the universe of people who could make it happen was small.

Yesterday I had a conversation with a pre seed founder. Exact words are, we're going to go raise 2.3 to 3.7 million. And I was sharing. I think maybe you could raise a little bit less. And I think because I thought the opportunity was pretty interesting. But I also was trying to explain, if you raise a little bit less, you're taking more risk on yourself, you're betting on yourself, you can get farther valuation, raise more on the next round at a higher valuation. That's my pitch. What's your pitch? When you hear someone who's like trying to raise a lot right out the.

Gate, I always tell people, how many compound problems do you want to solve? So what I tell founders is if you raise less than a million, you're actually only signing up for product market fit. You need to build a product, you need to get some level of usage. But I don't expect you to build out a management team. I don't expect you to solve GTM. You got to build something. You get to $2 million. I expect you to build a product and get to some arbitrary amount of MRR, some, I don't know, somewhere between 10 and 25k in MRR and to start to build out the sums of a team. And if you raise more than that, I expect you to do all three of those things. Build out a core team, get further along in MRR and build a product. The problem is no matter how much money you raise, you're starting from the same place. So in the $2 million case, if it costs you a million and a half dollars to get the MVP out the door, you only have 500k left to do the other stuff, the team building. And God forbid you raise $3 million and it takes you two and a half million dollars to get the product right, you're toast. So what I tell people is like, how do we scope this down so that the work you're signing up to do is the work you want to do? And for most people I deal with, I'm like a million bucks is probably the right amount for you to get started. Especially if you're a first time founder and you really are starting from scratch.

I totally agree. The aspect of AI and pre seed I think is fascinating. And you've written about this a fair bit. I feel AI. There's a tension in the sense of AI makes it so that distribution is so critical because you can now code faster. However, because distribution is so much more important, you probably want to raise a little bit of capital to test that. I want to hear your thoughts.

We are trying to unpack this puzzle in real time and I don't know that I have the answer. On the one hand, I also struggle to fully understand. I think Jason Lemkin wrote about this a while ago. You know, 50 million in ARR used to mean something. It used to mean you had like fought and won customers who were likely to stick around because they'd made you're gonna have churn, you have ups, but they'd made like a pre definitive decision that your product had value. And I met a company the other day, I was like, oh, so like what are you doing with these coding agents? They're like, oh well this team uses replit, this team uses Windsurf, and this team uses cursor. I'm like, so you're a customer of all three? And the person said, those are the three that I know of. What do you mean? He goes, I'm sure there are other people in our team who are using GitHub copilot who are using other things. And I'm like, so what's your plan? He's like, well, we would love everybody to be on the same platform, but we also want them to be productive. It feels early to make those decisions, but it's like at some point at the company level we're going to standardize on a tool and that's not where we are with AI right now. And so we have companies in my portfolio that have gone from 0 to 4 or 5 million in ARR. And I think maybe we should drop that last R off of ARR. We're not really sure if this is recurring. It's pretty clear that it's real money. And so I struggle to think, like, what does it mean? You know, the first company I saw that got the 10 million bolt, that's, that, that's impressive. I'm like, but now everybody can kind of do that. Also, like, people are using the tricks of the trade. These annual contracts with the 90 day out so that you can book it as annual revenue. I'm like, well that's like really not the same thing. So I don't know. I, I really struggle. So we're probably, I told Someone yesterday about 40%, maybe 50% of the investments you make are heavily leveraged to AI. We're. Which makes us feel like horse and buggy Luddites compared to everybody else because most of my friends are 90 to 100% of their investments are like focused on AI.

So I want to double click on AI. A teammate helped me draft this question. That is in a recent AI article, you discuss how AI investing reminds you of the 2000 Internet investing period. You mentioned two themes that we'd like to unpack. First is, can you elaborate on the idea that we are in a harder phase of aligning what the tech can do today with and what benefits companies can truly reap from it? Second, the idea that we are speedrunning AI and investing so much capital so quickly that we aren't getting the opportunity to learn from what is and isn't working and making adjustments along the way.

So in 99, in 2000 in the Internet, there were all of these really good ideas. People wanted to sell pet food online and everyone's like, ah, but like we don't have good payment rails, we don't have shipping and you know, Amazon, we didn't have all the shipping logistics. So you know, a 50 pound bag of pet food maybe cost you 250 bucks, but the person who was selling it to you would sell it to you for a dollar. The business models were upside down and all of the infrastructure we needed Just didn't exist. And so. But now we have Chewy and Bark Box. People buy dog food online. Same thing with groceries. Webvan had these huge warehouses. It didn't really work. Cosmo.com was part of Postmates and Uber Eats before those things existed. And Doordash, all of these things work now, but they work 20 years later. Because behavior had to change, technology had to change. You needed smart. There were all of these things that had to happen. And so that's kind of what some of these AI things feel like to me. I use them and I'm like, well, this feels a little brittle. Doesn't quite do what I think it's supposed to do. It's not perfect, but I can see the future. I can envision a world in which AI will draft replies to 80% of my emails and they will be good enough that I will let it send them without me reading them. I wouldn't do that today at all. I could name 50 different use cases where I think that's the case, but that's exactly where we're supposed to be. A couple years into the commercial development of AI, we're right where we're supposed to be. And the speedrunning comment was more in Internet 1.0, we funded a bunch of stuff and then we watched what happened and we said, oh, that works. That doesn't work. Let's do more of this, less of that. And the amount of money that went to the Internet, while staggering at the time, is a drop in the bucket compared to what we're putting to work in AI. And my fear is we are funding AI companies at such a rapid clip I could name. I just remember when that Devin video came out, everyone's like, oh my God, this is it. This is the end of software engineers. And like, nobody really talks about. I don't know what's happened to it, but no one talks about that company anymore. And every six months there's some new flashy AI demo that takes over everybody's brain and we can't stop talking about it. And then six months later, it's a new thing. And people try to use these tools and they're like, they don't. Perfect example, the AI SDR stuff. A lot of those tools I think do more harm than good. I think in 5 years the AISTRs will be good enough that, like, meeting, booking, all of that same thing. Recruiting. I met someone who's building a recruiting coordinator tool. It doesn't really work. It's not smart enough. It's a little Brittle. I think in five years after just refinement, those will be good enough. So maybe it will only take 5 to 10 years for AI to be good enough. But as you know, as a pre investor, if I invest today and it takes five years, I might lose all my money because the companies we're backing today might not be around when everything comes together.

I want to talk about portfolio theory.

Oh yeah.

Something we were talking about right before recording in fund one. We're around 40 deals right now. 40 startups. How many startups will you invest in out of each fund?

The smallest fund we have, which is our first fund, has 83 companies in it. The largest, I want to say is 110. Some of that inflation is that I'm no longer the only person who writes checks. And so I, I have teammates who write smaller checks into the fund. But 80 to 100, it's kind of our sweet spot. And I would say having spoken to literally hundreds of LPs, I think there's maybe a dozen LPs I've met who deeply believe that our portfolio construction is correct. Most of them want us to be at 30 to 40 companies buying 10%. Highly concentrated. And what I try to tell them is a pre seed fund is not a little series A fundamental. It operates differently, it has different incentives and it requires its own construction. And the hardest thing in fundraising for us has been finding LPs who are at least open minded to our portfolio construction. That is the hardest thing to do.

I believe There are few LPs and people in this space who understand the large volume that pre seed managers have to do. Peter Walker is one of them. We discussed that in our podcast. The other one is Virtus.

Virtus, yeah.

Steve and Alex, they love talking about. They say at least 50.

Yeah.

And then another topic though is when you have say 50 to 80 to 100 portfolio companies, you have to interact with them. You have to do the work.

Yeah.

I have talked to some of your founders and they have told me you are accessible and available. And I'm just like, that is incredible given the number of companies you're in. And I think you're one of the hardest working people in venture. How do you do this?

So I have five people that help me stay organized and the firm wouldn't work without them. They're critical. I think the other thing is we stepped back and asked maybe a different set of questions. One was like, what are the things that we can do, maybe better than our founders, not because we're smarter, but because we get more practice. So that was one lens. Second was like, is it really critical that every answer come from us? We'll come back to that in a second. And third, what promise do we want to make to founders? So we'll go in reverse order. The promise I wanted to make for people was like, I want to be your most useful, helpful investor to the extent you take advantage of me and what I can offer you, kind of for the first two years of your life. Because after that, you know, you get a seed investor. And nowadays a seed round comes with a board, usually, and that's going to change the way you spend your time. And you're going to spend a lot more time with that person than you will with me. And I'm going to get time back when you graduate. Unfortunately, when companies fail, we also get time back, but that's not as great. So one thing is, I tell our LPs, we're really signing up for two to three years of work, and in some cases it takes four years. But there's some finite period of time where we're going to be the primary point person in this relationship. So we always are, you know, making new commitments to people, but we're also getting time back. And so we have a whole model at the firm of like, how many commitments can we make, given the commitments that we still have to honor? And we keep it in balance. It runs very hot, as you can tell, but we figured out how to keep that in balance. Second, I don't take board seats. And also, we have a more modest view of what we can do to help founders go into this. What do we know better than they do? Fundraising tends to be a thing that we know better than they do. Because at any point in time, we have 50 or 60 companies that are in market fundraising. So we know who's active, what they care about, who actually has money, what good looks like in this market, what are the characteristics of the companies in our portfolio that's gotten funded? We have a point of view on that that very few other VCs have. Also on people like, can you make intros free for me? We have built our own database of 1500 individual investors, their likes and dislikes. And I'm like, yeah, I can get you a hundred intros. And very few other VCs can offer that. But I don't do a lot of, like, wireframe review or I don't do a Friday call with everybody to check in. I'm like, they're adults. Like, I. I trust them to run the company. But. But a long time ago. You know, one of the pieces I make everybody at Precursor read when they join is a piece called the Inflection Point Theory, which David Lee wrote when he was at SV angel, which is kind of my philosophy, which is there's a few really important moments in a startup's life. Co founder conflict or key hire pivot or strategy change, fundraise M and A. You have to show up for those five classes of events if you show up for those things. My experience has been founders really love you. If you join the team all hands every Friday or if you provided feedback in the wireframe, they actually don't care. So we focus on those things. The other thing is, and I learned this from the folks at yc, probably half the questions that people bring to me, the right person to provide them with feedback is another peer founder who's in the moment. And that's not just like, should I go with gusto or justworks. It's also like, a couple weeks ago I talked to a founder who's like, hey, we just walked away from an acquisition and six months ago, and the acquirer came back. Do you have anybody who's gone through this as a. I have two companies that went through that a year ago. One ended up selling, one ended up taking another deeper dive with the seller. Rather than me, summarize what they told you. I'll just put you in touch with them and you'll have a much richer conversation. So I think taking yourself out of it and saying, I don't have to be the provider of all answers. The last thing I'll say is, in my experience, Pre Seed companies don't need a big VC platform from us because nobody knows who they are. Like, a recruiting person would have a devil of a time trying to get people to care about these companies. And the ones that are successful and get to seed are going to get somebody else's platform team anyway.

The one thing I really like about Pre Seed is I feel like it aligns us as close as possible to that rail, that is founders. And so whenever they have questions, whether it's like Series A or Series B or series C, sure, they might be someone else's problem now that they've got a board, but they'll come back to us. They'll come back on those most critical things. It's like. Like how we come home when we have like the most difficult issues.

That's right.

The other thing that's really interesting around Pre Seed is I will joke that the Big firms, namely like Lightspeed, Andreessen, General Callous, they won't wake up for a less than a $10 million check these days. And okay, it might be 5 million because they've got some other like they've structured a certain way. But what's your take on that?

I think it's interesting. I've been to a bunch of events where I've heard the big multi stage firms talk about seed. They don't really talk about pre seed because I think it's too hard. But a lot of them have said, hey, we're managing multi billion dollar funds, which means we have to be in the biggest, far outlier companies that are created. And when I talk to them there's like, well, there's two challenges they have. One is you can't not do seed because seed for them is kind of an information discovery phase. So if you're looking at coding agents, you want to know, well, what are all the companies out there? You want to have met them at seed, you want to have a CRM with a bunch of information about them so that when they all come in at the A, you have a sense or point of view on which ones are the most effective. And the ironic thing is some of them said we're doing less Series A investing because the flip side is you can't end up in the wrong company. So if you come in too early and you create a conflict that blocks you from going after another company, that's actually the worst thing that could happen. And so I think it's fascinating for them, if you have a multi hundred million dollar dedicated seed vehicle, you can write multimillion dollar seed checks just like you. And I would write a 250k check and not stress about it. I've met a lot of founders who think when they take $2 million from one of those firms that they're getting the first class experience.

They're not getting Mark Andreessen, they're not.

Getting Mark Andreessen, you're not getting Mark Andreessen, you're not getting Hemant, you're not getting Node, you're not getting that. And even the partner you get who's not those people who's also very good in often cases like seed, if your company's doing well, they will spend time with you. If it isn't. I've consistently seen Seed V actually I don't think the VCs are over promising. I think the founders are over expecting, if that's even a word. There's just a mismatch there.

Let's talk about Precursor. So you founded Precursor with the core belief that all entrepreneurs, regardless of background, benefit from having an institutional investor from the very beginning. What were the key drivers behind this conviction and what gap in the early stage landscape were you aiming to fill? You talked a little bit about that already, but if you can flesh that out.

I think the institutional piece, what I learned is repeat founders. I think because they've done it before, have instincts about things that are, that are good and they have networks of people they can go to to get feedback. I don't know about your experience. Probably once a week a pre seed founder comes into my office and tells me something. I'm like, that is ridiculous. You should not do that. Oh, I read this blog post, I read this substack where this guy said, this is the thing I should do. I'm like, who's that guy? And why are you listening to. Oh, I'm on this group chat with a bunch of other founders and they have like, I remember when like the whole memo versus deck thing came out, I'm like, you all need a deck. You can have a deck and a memo, but you need a deck. And I think what an institutional investor can do, particularly for first time founders, is help you understand this new terrain that you're trying to navigate that you've never seen before as a first time founder. And I don't think you get that in a party round with a bunch of angels. I don't think you get that with an institutional investor, as we were just talking about at a big firm, who doesn't really have the time or incentive to spend time with you. I think you need somebody who cares about your company at that stage and who can give you the kind of insights you need to make good decisions.

You've been very impactful in the industry overall. You are the MVCA board chair, National Venture Capital Association. You create great content. You have a podcast, you have, um, let's talk about all. Like, I feel like a pre seed investor, like a pre seed founder has to do so much. Um, can you talk about all the different things you work on?

One thing I tell my team, I, they're probably sick of me saying this is. I wake up every day thinking that like there's a great founder out there who doesn't know who I am, who doesn't know who I am. We are not on their radar screen. They're not thinking about Precursor. So I was asking myself, where are the people we want to find and what can we do to reach them so that when they think about starting a company. So we've run a ton of experiments. We did a pre seed workshop which has been really fun where we invite 20 or 30 people to come spend a day with us and just talk about going from idea to.

This is like a month ago.

Yeah, we did our second one a month ago. It was awesome. It's not scalable at all. It's a lot of work but it's very fun and Ashton and I work on that. It's really fun. We have Learning Corner on our podcast. So I'm always thinking like how do we just get in the considerations because if people aren't thinking about us, they're not going to email us, they're not going to show us their company, we're never going to see it. So I was thinking like how do we show up in the places where these founders live and how do we show up in a way that will make them think of us when they're ready to raise a company, when they're raised funds. So you know, I go to, I probably go to four or five events a week.

You just flew in from New York?

From New York. I was at one of our portfolio companies, had a launch event in New York. So my view is that like you can. I am not so smug as to think people are just gonna find me, Tim. They know who I am. I'm like, no. There are people out there who have great ideas who don't know me. They've never heard of me, they've never interacted with precursor. And my job every day is to try to shrink. It's just like never ending battle. I'm trying to shrink the universe of people who don't know us. But every day more people wake up and decide I wanna start a company. So it's an unsolvable challenge, but one I like press our team on a lot to make sure that we're getting out there and that people know who we are.

Are There's Charles Hudson precursor podcast. But then you also have a great substack and I, I really like how like you will take the time to distill your thoughts and share what's happening in the industry. I believe your pre seed event, it's called a boot camp.

Yeah, it's a boot camp. Yeah.

And what's really cool is we talked with a lot of veteran founders. John Dennison said he went to it. Yeah, he went and he said it was like game changing. He said it changed how he thought about building startups. So really Appreciate how you all are engaging with veteran founders. You've written about the three futures of the early stage VC ecosystem. Can you talk about these three potential future states? There's a return to this status quo, a bifurcated seed market and a big fund hegemony. Which one do you think venture will play out?

I think right now we are in the bifurcated seed seed world. And what I meant was, so when I started at Uncork, the big multi stage funds, every two years would like spin up a seed program. They'd make a bunch of seed investments. They'd be like, this is a distraction, this is hard, I don't want to do this. And then they would sort of give seed back to seed funds and be like, fine, you guys do this and just bring us the good ones. And then a few years ago, and I think what changed is as their funds got larger, it was more important to capture those big outlier companies earlier. So I felt like a lot of those firms, like, well, we have to be in seed. We cannot rely on our network of seed friends to show us the best deals. We have to have our own proprietary play. You know, you've seen General Catalyst, that Yuri from Wayfinder join them. You've seen lots of scout programs, you've seen other people make pretty significant investments in their seed. A 16C speedrunner, Eric Tornberg Thornberg Speedrun. Yeah, everybody's like, we're definitely not going back to the way it used to be. Where the multi stage firms just waited for and not that they ever did this. I don't want to make it sound like they're lazy, but where they were content to have the seed firms really manage the seed market, they're in that market now and they're not leaving. For me, the fundamental question is if you think about where the best companies come from, I continue to believe multi stage firms are going to dominate the repeat founder. I just left OpenAI. I just left anthropic game because they can afford to pay prices that most seed firms cannot. Also, there's a class of founders who actually doesn't want much in the way of engagement, support, governance or oversight from their investors. They actually want capital to be left alone. And if you're a big multi stage venture firm that's trying to put a lot of money to work and where time is your most precious asset, somebody who wants your money and not your time is actually a perfect match. But I think we're also going to have a set of founders who want engagement, who can't Go in or choose not to go get that big round for a multi stage fund. And the real question is, well, where do the outliers come from? And if all of the outliers come from the repeat big money seed rounds that the multi stage funds do, there's actually no need for seed funds. So I don't think we're going to end up at 100% of those of the outliers coming from the multi stage repeat people. I don't think we're going to put zero either and where we are on that slider. Because if you think about it, if you're an LP and you're like, well, if I can get 90% of all of the seed outliers just by doing the big funds, do I really want to meet with 100 managers to capture the other 10% of Alpha? No. If it's 50 50, then you have to have a strategy that also engages. If you're an lp, I think that also engages. And if it's more like 70, 30, then everybody who runs a seed fund is fine.

Let's talk about associated with this, incubators and accelerators. Because when we invest in pre seed, we have absolutely no issues if a startup wants to go do an accelerator because it's like that's part of your developmental. Whereas we typically won't spend as much time with companies after they've gone through an accelerator or incubator. I'm curious what your take is.

We have a similar view. One of my LPs we were talking to me goes, why do you have so much overlap with yc? I'm like, well in the beginning of the firm we invested in YC graduates and now we produce YC graduates. Like we are in a bunch of companies that got into YC after or coterminous with our investment. We don't do as much on the other side because the prices don't, they don't really work for us. So it's like good for YC companies, good for yc, not great for us. The other challenge we find with studios and incubators is sometimes the amount that those entities own of the company. Like I just met a company I really liked, we saw the cap table and a studio owned 45% of the business and I was just like, it's just too much like I can't, I can't make the math work on that. And I worry about the next investor also looking at that huge slug owned by the studio and just saying thanks but no thanks. So we found this to Be really hard. And occasionally we've done the work of like fixing the cap table and I'm always like, couldn't we just find something easier? Do we have to do this hard thing?

So for all the founders that you meet, what are like, if you had to share like your biggest piece of advice, what would it be? Ooh, I think at the pre seed.

Stage, I think it's like, make sure you've chosen to work on something that you'll be interested in for seven to 10 years. It's really hard to know, but I find sometimes people come to me with ideas that I think aren't really that well thought through. And I'm like, given the amount of time you've spent thinking about this, are you sure you really want to spend seven to 10 years of your life on this? Like, either the insight feels ephemeral or like they haven't really addressed the like sticky hard questions or they don't have enough of a point of view on, like, why people really need it. And like, starting a company is not something one should go into lightly.

We tell foundersreamy that we invest in quality founders and big markets and that's how we evaluate companies. How do you evaluate companies?

It's 60 to 70% the person and 30% the market. The zero percent product because there's usually no product. And I tell them, look, it's gotta be mostly the person because we don't replace founders that precede. So like, we are going to go on this journey together. As far as I tell people all the time, you need to become and remain the founder that your company needs. I have a board meeting this afternoon and like I talked to the founder this morning. I was like, your job is to stay ahead of the curve of what the company needs. As long as you are ahead of the curve in your development for what the company needs, you will remain the CEO. If you fall behind, either the company will fail or you will not be CEO. I don't want either of those outcomes. So what do we have to do to make sure that you are growing fast enough to be the leader your company needs? So we spend a lot of time on people and with a million dollars, if you pick a terrible market, there actually isn't enough time to pivot into something better. You're just going to go out of business.

This has been fascinating. I've learned a lot. I want to close this out with some rapid fire questions. What are your favorite snacks?

Oh gosh, I'm telling myself. So my chief of staff buys me this from Costco, this big box of Lays minis that has Cool Ranch Doritos, Nacho cheese Doritos, Barbecue Lays, plain Lays and Cheetos. And I do not keep these things at home because I will tear through them but I do, I do like anxiety snack at work on those things.

Favorite Books Whether it's business or not.

I have so many. I can tell you a book I read recently that I really enjoyed. It's called the Wager. It's about this British this basically this British sea expedition that went to go try to capture a Spanish galleon that was full of silver that was coming from coming from South America back to Europe. And if you think like Shackleton had it bad, these guys had it worse mutin everything but they all survive and they end up going back to London for the court martial. It's a fascinating if you like Tales of Adventure and it discusses actually a lot of human psychology in the book too. It's a really, really enjoyable read.

Favorite movies I feel like this is.

So like dude coded but Die Hard is one of my favorite movies.

Die Hard is a great movie. Watched it with our teenage son over Christmas.

It is, it is in fact a Christmas movie. So well done. Favorite travel Spots I just came back from the Maldives for the first time. It was incredible. If there's a place I could go over and over and over again, it would be Barcelona.

Charles thank you for what you do for Pre Seed founders. Thank you for what you do for the industry. Thank you for what you do for solo gps. In fact, you're hosting an event this evening for solo gps. Wishing that we're going to be co investing in many deals. And thank you for your time and.

Thank you for everything you guys do for the veteran community in the military.