Will Quist on Venture Capital, Investment Risk and Going Beyond Consensus

Will Quist grew up on the San Francisco Peninsula and rode past Sand Hill Road, but initially knew little about venture. He spent much of his youth playing water polo.

At Berkeley, he helped startups funded through business-school competitions and became fascinated by the practical work of building companies. After college he played professional water polo in Hungary for a year.

Returning home, he joined a new media venture founded by the creator of Red Herring. Reviewing submissions for a top-company list brought him face to face with hundreds of startups and convinced him he wanted to select and finance companies.

After investment banking, Quist joined Industry Ventures. Its partners believed companies would stay private longer, creating new needs for secondary transactions, later-stage capital and limited-partner liquidity.

At Industry he examined hundreds of companies and fund partnerships, gaining a broad view of venture. He later joined friends at Slow Ventures as they turned their personal investing into a fund with outside capital; he says their strengths complemented one another.

Stebbings asks why Quist says 95% of venture capital is not really venture. Quist distinguishes “venture classic” from a newer growth-oriented business; the percentage is his characterization of the industry, not a measured statistic.

For Quist, classic venture finances a founder to test a knowable hypothesis whose success could dramatically increase company value. Its ideal is a relatively small amount of equity capital creating a great deal of value over time.

Much of the capital labeled venture, he argues, pursues businesses with data that can be modeled and extrapolated rather than novelty. He sees later-stage growth investing as a valid strategy, but a different one.

The formula is simple, execution hard: investors must assess the risks and rewards of experiments and balance product value, market size, the founder’s background and other contextual factors.

Quist suggests the apparent shortage of rebels may reflect the rapid growth of firms calling themselves venture investors. As an investing business scales, it naturally attracts people and processes suited to a more established game.

He sees a recurring pattern across investment banking, hedge funds, private equity and venture: a young, volatile field starts without a shared formula, then scales and develops a more competitive consensus.

Large multistage funds can treat seed investments as options and may invest in competing companies. Quist says conflicts are real, while their larger fund sizes make an individual seed loss less consequential.

When Stebbings asks how seed managers can compete on price, Quist says Slow deliberately steps away from the earliest-stage consensus contest. Its goal is to go one defensible step further out on the belief curve.

Quist uses five questions to think about enterprise value. First, is the arc of history likely to work in the company’s favor over the next five or ten years?

Second, what value does the product create in absolute terms and relative to competitors? Third, how much is already spent on the problem, and what would have to happen for the market to grow?

Stebbings objects that a new market may have no existing spending. Quist agrees that the starting number can be zero; it does not automatically mean rejecting the investment, but it changes the assumptions and discount applied.

Fourth is defensibility: why can the company retain its position as rivals arrive? Network effects, intellectual property and regulation can provide protection, although no moat is permanent.

Fifth is the business model and equity efficiency: how much capital will be required to generate cash flows, and over what period? The questions are common across asset classes even when the evidence required differs.

He sorts answers by evidence: substantial first-party data, relevant third-party data, early first-party anecdotes, or hypotheses. Public-market investors may rely on long histories; early-stage investors often must place weight on credible theories.

The classic venture opportunity is to finance an experiment when an investor has greater conviction than others in a theory. Turning a hypothesis into first-party evidence can reduce uncertainty and change the company’s value.

Stebbings describes losing money with an excellent founder in an impossible market. Quist replies that a bad answer on any one of the five levers can sink a business, while pushing him to examine whether the product offered clear, compelling value.

Stebbings points to currency and political shocks; Quist accepts that external events can overwhelm a company. He also argues that some markets are so capital-intensive that even a charismatic founder faces a steep uphill battle.

His risk matrix asks how many key answers are supported by data and how many are theoretical. Betting on several independent novel propositions at once can make an investment hard to price.

Stebbings asks whether a founder who succeeds once may gain insight that improves the odds of a second innovation. Quist agrees: experience and better information can make a subsequent theory more credible, so the risks are not necessarily independent.

A less-consensus portfolio should generally expect a higher loss rate. Quist says the response is more aggregate optionality: either bets with exceptional upside or a broader portfolio, rather than automatically adding more positions.

Taking more risk should normally earn a better entry price, although he says recent market conditions and investors with different incentives have made pricing noisy.

Looking three to five years ahead in 2022, Quist expects scaled, consensus-driven firms to do well if their organizations match their strategy. A smaller group will pursue classic non-consensus bets; firms in the middle may struggle to find an edge.

Stebbings criticizes limited-partner incentives that favor established brands over potentially higher-returning funds. Quist adds that large LPs may reasonably value deploying substantial sums at a lower expected return rather than seeking the same percentage return from every fund size.

His concern is the shift from underwriting a scarce opportunity to competing to win whatever everyone else wants. He uses a hunting analogy: when capital is cheap, investors can become less selective and chase deals in packs.

He believes very large multistage firms have fewer structural reasons to collaborate when they can finance a company across stages themselves. Smaller classic venture firms face greater uncertainty and can benefit from sharing risk and working together.

On pricing, Quist says early-stage investors also need to consider allocation. Paying a low price for too little ownership in a major winner may be a portfolio construction error, not just a pricing mistake.

He cites LiveRamp: he led its Series B when many investors dismissed ad technology. The lesson was to look past a sector label and examine the customer, the value proposition and defensibility.

Quist recalls missing Deel after being highly price-sensitive in negotiations to lead its seed round. He resists turning this into a universal pricing rule: price matters, but individual misses do not yield a simple answer for every future deal.

Stebbings observes that an organization cannot instantly shift from a growth mindset to capital efficiency. Even after management changes strategy, employees need time to change their priorities and habits.

Quist compares early company-building to special forces improvising around a new objective, and later scaling to an organization that values repeatable processes. Founders should ask which work is still novel and where operational specialists are needed.

Stebbings regrets not selling some holdings in secondary markets. Quist suggests avoiding passive “hold mode”: either the evidence still supports buying, or an investor should start thinking through the conditions and logic for selling.

That mindset does not require an immediate sale. Illiquid assets are difficult to sell emotionally, intellectually and structurally; preparing a framework in advance can help, though he cautions there is no universal answer.

On reserves for follow-on rounds, he sees two coherent approaches: preserve capital for more initial bets, or concentrate in companies an investor can underwrite well. The choice depends on opportunity cost, fund economics and the manager’s skill.

Quist admires Sequoia as a well-run investment business. He recalls conversations with Don Valentine and credits the firm with treating venture as a business that must keep examining its market, products and defensibility.

For Slow, he personally prefers combining disciplined classic venture investing with a collaborative role among founders and other investors, rather than building a large multistage platform. He emphasizes that he is not speaking for all his partners.

His professional book recommendation is Michael Mauboussin’s The Success Equation. He praises angel investor Mark Goines for combining knowledge of investors and organizations with empathy and practical advice for founders.

Asked about Tiger Global in 2022, Quist predicts a smaller private-investing footprint while saying he does not know what will happen to its public portfolio. He still considers its core thesis about rapidly growing companies broadly sound.

He wishes founders would pause to identify their distinctive insight, product value and appropriate financing path. Not every company needs venture capital, and a mismatch can waste time and cause pain for both sides.

Quist has changed his mind about branding: after an era of excessive early branding spend, he thinks the industry may have swung too far toward measurable performance marketing. The right moment to invest in brand differs by company and its demonstrated value.

He discusses a recent follow-on investment in Fair Square Medicare, citing the founder’s execution and an opportunity to improve how customers choose Medicare plans. He also sees a possible path from that service to a broader digital-care platform for seniors.

Stebbings thanks Quist for a wide-ranging conversation; Quist says appearing on the show helped him clarify his own thinking.