How to get funded now

REID HOFFMAN: When we are in these times of disruption, the old power structures are no longer as firm or as strong. It doesn’t mean they’re non-existent, it doesn’t mean that there isn’t still privilege of which school you went to and which community you grew up in, but it means that that’s a much less of a rigid guidepost. Don’t limit yourself.

AILEEN LEE: I think we have a lot of Icarus companies right now, right? They’re flying pretty close to the sun. It’s like a shoot-the-moon strategy.

VAN JONES: The human dynamic here. In other words, no matter what the tech is and what the market is, if the people aren’t able to work together and if somebody’s sending a signal that they’re the wrong jockey, that can blow up the whole thing.

BOB SAFIAN: Those are the voices of Reid Hoffman, followed by investors Stacy Brown-Philpot and Aileen Lee, and capped by media figure and entrepreneur Van Jones, recorded live on stage at the 2025 Masters of Scale Summit in San Francisco on October 8th.

The investing landscape for VCs and entrepreneurs has shifted dramatically this year. In this special episode, Van plays the role of moderator engaging Reid, Stacy, and Aileen in a candid conversation about what’s changed in the investing space, what it means, and how players on all sides need to adapt. The exchange is full of lessons for right now, so let’s get to it.

I’m Bob Safian, and this is Rapid Response.

[THEME MUSIC]

Copy LinkVan Jones on how venture capital is changing

JONES: We’re going to talk about where we are in the world of investing, and I’m going to start with my own founder story. I am a founder of an AI start-up, and I did all the different things you’re supposed to do. I identified a problem that I knew about, which is how messed up the distributed workplace is, and so I said, “Hey, let me build a company to fix this.” So I found an amazing technical co-founder. We went out, raised some money in pre-seed, then we built a product that is working. It actually works. It sounds good.

LEE: I’m waiting for the shoe to drop.

JONES: Oh, the shoe is coming. The shoe is coming!

I’ve got this product. This is amazing. Now let’s go back into the market to raise money for go-to-market. We’re still pre-seed, and in the past two years, something has changed. They’re not doing this, they’re doing this. I’m seeing elbows. I’m like, “I don’t want to see elbows in a meeting.” I’m seeing elbows on the Zoom call. That’s a bad sign. And then they’re asking questions about profitability. I’m pre-seed. Profitability. They’re asking questions about conversions from pilot to paid. “What’s your moat?” I’m like, “I’m pre-seed!”

Something has changed. Having a good story, not enough. Having a great team, not enough. Having product market fit, not enough. There is something happening in the marketplace right now when it comes to investment, and we’ve got three of the best people in the world to ever do it, and they’re going to help you, if you’re an investor or if you are a founder, understand what’s happening.

First of all, we’ve got Aileen Lee. She actually coined the term ‘unicorn’ and now she’s doing Cowboy Ventures. Give her a round of applause.

LEE: Thank you.

JONES: Stacy Brown-Philpot is here. You may have heard of something called Taskrabbit. Give her the round of applause for building that into a massive powerhouse, and she’s now running Cherryrock Capital. And then we also have this young man struggling to make a difference in the world, Reid Hoffman. Give Reid a round of applause as well.

Copy LinkWhat you need to demonstrate to get funded

So look, this is going to become a therapy session for half of us. If you could tell the founders in this room some hard truths, what are one, two, or three things that you want every founder here to understand about the investment climate right now for new companies? What are the things that you are looking for that you’re going to have to stick with? And we may not want to hear it, but tell us the truth. What’s going on out there?

BROWN-PHILPOT: I’ll go first. We invested series A. Series A, the bar has moved, and Aileen, you can talk about where the bar is for seed, but the bar has definitely moved the pace of technological change, the expectations of returns. We want to see, can it scale? So what’s the difference between early product market fit, like 10 people like your idea, versus 10,000 people liking your idea versus a million people could like your idea?

The honest truth is you showing up with 6,000 customers is not enough. You have to show me the potential of how do I get to 60,000 and 600,000 and on what pace can you do that? And before there was always the assumption that the next round would take care of that. That’s gone now. You have to demonstrate that sooner, a lot sooner. I need to know it took you 18 months to do this. Well, you need to do this in nine months.

JONES: Can you do it?

BROWN-PHILPOT: Can you do it?

JONES: Ouch.

LEE: I think Stacy is totally right that basically we’re in this incredible new platform shift to AI and the rate of adoption is like nothing we’ve ever seen before. So people are seeing these hockey sticks that we’ve never seen before, and then they’re looking at enterprise businesses and the growth rate looks a lot slower and it looks a lot harder. And so you’ve got funds who are chasing this hockey stick. Now, what goes up often comes down pretty steeply. So I think there are going to be some shoes to drop in the coming years around some of these hockey stick companies.

What’s changed at seed, I’m a seed investor, is a lot of times people needed money at seed to build the product. Now there are so many tools to help you build the product, if you come and you haven’t actually tried to build something yourself and you haven’t actually given it to people and shown your ingenuity and your hustle to do more with less, you’re already taking yourself off the field.

It used to be if you were an enterprise software company, if you went from $0 to $1 million in a year, that was amazing and tons of people would want to invest in your company. Now, that’s not enough. They’re saying, “How about $2 million? How about $3 million? How about $4 million? Go from zero to four,” and sometimes that’s not even enough because they’re comparing you to someone who went to 10 or even 100 in a year. So it’s really, it’s a funky time for founders.

HOFFMAN: Yeah, two strong plus-ones of this. The way that all venture works is you’re saying no to 600, 800 deals during the course of a year and yes to zero to two of them. And the AI acceleration in terms of the tools just being described means there’s a ton more out there, which means that even though you go, “Look, I’ve got product market fit, it looks good, et cetera, et cetera,” it’s like, no, no, you got to understand what the benchmark of the competition is because it’s not just a, “I look like I’m good.” It’s, “Okay. I’m going to say yes to a very small number of things. What are the other things in contrast that I might be saying yes to?”

And to be clear, a lot of nos are like, “Oh, call me back on the next round, et cetera, et cetera.” If you’re not hearing a “yes,” it’s a “no,” just to be super clear.

Now, the other thing that is useful for entrepreneurs, go take your idea and go into your favorite frontier models and say, “Critique this. How would a skeptical VC, what would they tell me about this?” You will find that that is useful to you because you will encounter those questions in it.

LEE: That’s a perfect pro tip.

BROWN-PHILPOT: Yes, really good.

Copy LinkWhat most venture capitalists aren’t seeing

JONES:  That’s awesome. I saw the note-taking kick up.

So look, you’re somebody though, you take bets other people don’t take. You see things other people don’t see. What’s in the blind spot of some of the people who are dispersing capital that’s giving you this advantage to find and spot and invest in folks that other people may have missed out on?

BROWN-PHILPOT: One of the things that I see because I serve on big public company boards is perspective on what are CTOs and enterprises buying? So the trajectories of enterprise sales has fundamentally changed. And so if you come to me with your AI idea, it’s cute, and you probably get the 1% play money budget, but you’re not going to get the real budget. And so I’m looking for companies that are coming in with a value-added option that they can sell into a large enterprise that’s going to outdo the build option. And so now your competition as a start-up is this team that wants to build the thing themselves.

So what I’m seeing is who’s going to actually beat out that internal team that’s going to get the 15% budget pool, not the 1% budget pool? For those of you who are selling enterprise, you know exactly what I’m talking about. Your net retention is actually going to be a lot stronger and a lot better. That’s one thing that I see.

I’m also seeing founders come to the table with, “There’s a real hard problem in this industry that nobody is paying attention to, and here’s how we’re going to solve it. And we don’t just have an AI idea. We have a company, and we happen to be using AI for it.” That’s a much better sell to me than just an AI idea. There’s so many ideas out there.

LEE: So we’ve all been in the business for a while in tech, and things have changed a lot. When I started in 1999 in venture capital, there were way less firms. There was no seed round. You started with an A. There was no cloud, there was no open source, there’s no AWS. So you needed money to go buy Sun Servers and Oracle databases and so—

HOFFMAN: Probably most of the people here don’t know what a Sun Server is.

LEE: Yeah, you don’t know what I’m talking about. Exactly. So basically, I mean, back then when I started there were generally $4 million, and you were buying a third of the company, and the pool to hire talent was like 20%. So things have changed a lot. Founders have so much more power. If you have a great story, if you’ve got a big addressable market, if you’ve got really differentiated technology, you can set the rules now.

So it used to be the venture firms would be like, “We have a rule. We only do deals if we get 20% in the A or 20% in the B.” Now founders can say, “I’m not going to take more than 15% dilution in this round.” Things are very different. It’s much more of a conversation rather than the VCs controlling and determining what the terms are now.

Copy LinkInside the negotiations between VCs and founders

HOFFMAN: There’s a very small number of deals that are so hot that you can just go, “Well, I’m going to tell you exactly what I want,” and so forth. And sometimes some of those requests, even if you’re a hot deal, are negative signals. I have passed on investments that are like, “Look, you’re not being realistic to where you are, which means you won’t be realistic in the future. And even though I like you and the product, your lack of realism here implies that I think you’re going to not be successful.” And by the way, valuable companies have boards. Valuable companies actually don’t emphasize 10% versus 12% dilution. They emphasize chances of being successful.

And I actually think on both sides that negotiation is because this is – fundamentally, one of the things I love about this investing business is you’re trying to ultimately be non-zero-sum. You’re trying to build so much value for everybody that it really works, but the negotiation itself is zero-sum because it’s like, “Well, for a dollar I get X percent” as the equation. But that’s a great learning experience between the investor and the founder to say, “Well, how do we navigate this particular thing?”

LEE: Yeah, what’s the dialogue?

HOFFMAN: And that’s what both sides should be learning. And when I learn negative lessons in that dialogue, I go, “Eh. Oh, I’m good.”

BROWN-PHILPOT: I have to agree, plus one to everything you both just said. We lead rounds for series A, and we request a board seat at the time of leading the round, and it is a conversation. We expect you to negotiate and we expect it to be a conversation, but how you show up in that negotiation is a pretty good indicator of how you’re going to show up and how we show up. We believe it’s a good indicator of how we’re going to show up for you. And so treat that negotiation as not this, “I’m trying to win.” We don’t – if you win, I lose, and if I win, you lose. We got to go together.

And there’s a commitment that happens at the time of investment that goes beyond the money. It’s like I had to write the check and now we’re done? It’s like, no, we made an exchange. I agreed to give you some money. You agreed to deliver on these goals. None of us are going to be right, and we both know that, but let’s go in knowing that there’s a commitment to working together. And I think that’s what’s different. There’s a few companies out there that’ll write their ticket, but by and large, it’s a conversation. It’s a negotiation to a commitment.

LEE: The other thing I’d add is talking about setting the company up for success is how much you raise and at what valuation. There is a tendency for some founders, especially because you read, if you read TechCrunch, you read the news, you see these giant series A’s, giant series B’s, and you think like, “Oh, they’re beating me,” or, “I need to match them,” and that’s not always the right answer and that is –

JONES: Why not?

LEE: That is a conversation that you are – I think we have a lot of Icarus companies right now, right? They’re flying pretty close to the sun. It’s like a shoot-the-moon strategy, which if you are a big fund and you’ve got a lot of companies, this is just one of your bets. But if this is your life, this is your family’s ability to put food on the table, you have to know that when you raise a lot of money, you are potentially making your business less capital efficient, which might make it harder for you to raise the next. You’re putting a bogey on your back that you have to achieve incredible results to be able to do an up-round for your next round. And if you raise so much at different valuations, you may make exits less likely because you’re more expensive for acquirers.

So I think that’s part of the conversation, as well as what’s the right valuation? What’s the right trajectory? Are we on the same page with how we’re setting the company up for lots of different kinds of options in the future?

JONES: You know, it’s interesting to hear about the human dynamic here. In other words, no matter what the tech is and what the market is, if the people aren’t able to work together and if somebody’s sending a signal that they’re the wrong jockey, that can blow up the whole thing.

SAFIAN:  Hey, Bob Safian here. I love how Van wraps this up, spotlighting the human elements that are in play in the investing and business decisions we make, but of course, technology can complicate things. So how is AI impacting the landscape? We’ll hear Van, Stacy, Aileen, and Reid talk about that and more after the break. Stay with us.

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Before the break, we heard Van Jones lead Reid Hoffman, Stacy Brown-Philpot, and Aileen Lee in a conversation recorded live at the Masters of Scale Summit about the changing expectations of VCs and founders. Now, Van talks to Reid and the crew about the impact of AI on jobs, how to bring skeptics along on the journey, and whether the disruption of AI might actually help disadvantaged communities. Let’s dive back in.

Copy LinkThe impact of AI on society & work

JONES: You have been a cheerleader and a champion for the positive part of AI. I love that you have this kind of framework of the zoomers, the bloomers, the gloomers, and the doomers in terms of how you look at all the different relationships and the zoomers just want to have AI –

HOFFMAN: Close your eyes.

JONES: Close your eyes.

HOFFMAN: Hit the accelerator.

JONES: And let it go. And the doomers are like, “We’re all going to die.” And the gloomers are like, “Well, we may not die, but I’m not going to have a job.” But you’re a bloomer. You think that this is going to be net positive. As people are sitting here figuring out how they’re going to build their companies, they’re using AI to make their company better, but you got a bigger view than just a company. Talk a little bit about AI and why you’re such a bloomer in terms of the net positive of all this.

HOFFMAN:  When we have these major technological waves, the initial impulse in human beings is always like, “Oh my God, it’s going to upend society. It’s terrible.” And by the way, the transitions are very difficult. I don’t mean to be hiding the difficulty of the transition, but we don’t have anything of our modern society without the printing press, which creates science and all the rest, without the Industrial Revolution. This is the cognitive industrial revolution. It will transform every job that involves language, and most jobs do, will get transformed. And so the skill set will be different.

Typically, we go, “Well, I’m an expert because I’ve memorized a whole bunch of information. I’ve memorized a bunch of information about medicine. I’ve memorized a bunch of information about law. I’ve memorized…” Well, now we’ve got our memory agent with us, and the worst AI you’re going to use is the AI you’re using today. It’s going to be increasing. So that will lead all kinds of transformations.

And it’s hard to envision exactly the way the world changes. You couldn’t envision what would happen with the steam engine. You couldn’t envision what would happen with the printing press, but you can shape it. And that’s my – it’s not I’m just blindly optimistic. It’s that I have a bunch of historical information. I understand how we can build these things, and we can make it so that it’s a much better elevated human agency, human condition. Now, the transition will be difficult, and so we need to navigate it.

LEE: I’m curious though, you think the jobs that get eliminated, will there be a one-for-one recreation of new jobs using AI?

HOFFMAN: Look, I think no one – anyone who claimed they knew it either way is making a mistake, right?

LEE: Yeah.

HOFFMAN: Definitely yes, definitely no, is a mistake.

Now, the one that I use as a canary is customer service because roughly speaking as a proxy, any place where you’re trying to get human beings to do a script, a job that robots do, robots can do it better. Right?

LEE: Right.

HOFFMAN: And by the way, right now, you get this funny thing where people are calling human beings outside of customer service and saying, “No, no, put the human on,” because the human being is doing a bad job because it’s a script and everything else, that they’re thinking, “Oh, this must be a robot.” Actually, in fact, I think we’re going to have it where, “Put the robot on because it’ll help navigate this,” and we will have some of those.

And so will suddenly there be a new form of customer service job? I don’t necessarily think so. I mean, customer service experience, transform it. How can it be brand positive? Thinking about that, those kinds of things, yes. So not one-for-one and everything, but on the other hand, the same thing of like, hey, everyone moved from agriculture into the cities. It wasn’t a one-for-one of, “Well, I was driving a plow.” It doesn’t happen that way, but I think we figure out ways to have people employed in various ways and that’s –

LEE: I think we will, yeah.

HOFFMAN: – the bottom line.

LEE: And there’s tons of – we’ve been investing in a bunch of companies where the industry can’t find the labor in healthcare or administrative stuff where the turnover’s really high, they’re having a really hard time finding the people to do the jobs. AI is being pulled into actually a lot of industries that are not considered sexy industries because they can’t find the talent, and so I think that’s part of what’s really going on that’s transforming our economy.

BROWN-PHILPOT: I think that’s right. We invested in a company called Certiverse that’s actually helping with the transformation of knowledge, so how do you learn a new thing and how hard that is. A friend of mine said they invested in accounting. That’s doing the same thing for customer service and accounting. I’m a CPA by training. They said, “What do you think, Stacy?” And I said, “Well, there was definitely some jobs when I was in public accounting that I did not want to do that, that I wish that there was a machine or some other human being.”

JONES: You got lot of heads nodding out there.

BROWN-PHILPOT: Yeah, people are nodding. Like, “I wish there was somebody else who could do that job.”

So yes, we have to go to this future where you’re not doing this work that you don’t want to do, but then the question is how do you re-qualify for the next thing? And there’s some people who are going to figure out how to do that. There’s companies, like one we invested in, that’s going to help people do it. And then there’s people who are going to have say, “Oh my God,” they’re in the dooming bucket. They’re just sitting on their hands. But we’ve got to figure out how to bring those people along too.

HOFFMAN: Well, actually, there’s an important point to add on this. Look, there’s no way to AI-proof yourself or AI-proof your job, but the jobs of the future will be: how well do you use AI in order to do them?

So categorically, what I tell everyone is, “Start using it.” Literally, it’s almost like a ritual thing of how many times a day are you using Deep Research, because if you’re not in information jobs, you’re well behind the curve. So it’s like, start using it personally. Don’t say, “Oh, I’m smart. I know how to.” No, start using it. You learn things.

JONES: I just want to get your guidance. Some of us, we’re trying to figure out how to get the overlooked, underestimated talent and communities to play this game. I think it could be awesome. Listen, everybody’s like, “They’re going to disrupt everything. Everything’s going to be disrupted.” I’m like, “You say that it’s a bad thing. I’m not so excited about the status quo right now that I don’t want to… Are you that happy with the education system we’ve got? With the healthcare system we’ve got? Please disrupt this stuff.”

So I’m more on the P-bloom than the P-doom, but I would like to get your guidance with people here. What kinds of mentorship programs or other things would you be excited about seeing in the world that would get more talent playing the game that you’re playing?

BROWN-PHILPOT: I think trying it every day as an individual is one great way to do it. Who’s on your board that actually knows something about this topic? Bring them in. Find the digital natives in your company, in your organization. They are already doing this.

JONES: They’re often younger.

BROWN-PHILPOT: Elevate those people to those roles. I joined the HP Board when I was 39 years old, and I was young, but I knew so much about technology compared to everybody else in the room that it really just fundamentally changed the conversation. So you have that talent just sitting right there. Don’t overlook it.

LEE: Yeah, you were so much more tech-savvy than everyone else, I’m sure.

Copy LinkMaking sense of massive valuations

JONES: You coined the term ‘unicorn’ and ‘unicorn’ used to –

LEE: Sorry.

HOFFMAN: And by the way, I’m now hearing, Icarus.

BROWN-PHILPOT: Icarus, I know. I wrote that down, Icarus.

JONES: We’ve gone from unicorn to Icarus. Those are very different mythological frameworks, but it does make me – I mean, it used to be that unicorn was an aspiration and now it’s almost an expectation, and you’re seeing all these companies with these billion-dollar valuations. How do you evaluate value now? You see these valuations, but where’s the real value here?

LEE: It’s so funky because if you look at the public companies, they’re trading at six, eight times, maybe 10 or 12 times revenues, and then you’ve got private company valuations where it’s got a term sheet and it’s 50 times revenue. It’s really hard because I don’t think that a lot of these companies are being set up on the right trajectory. The tech industry has been comprised of pretty much the same kinds of people for a very long time, and the wealth creation and the societal impact of our industry is massive and it’s global. We know there are so many studies that show that diverse teams and people from different backgrounds come up with better decisions and they come up with better results.

So I think in this age of AI, like what Reid and Stacy were saying, we’re so excited to see more founders from different backgrounds come to the table with their ideas, serving communities that are overlooked or business processes that are overlooked. And I think this is go-time for all kinds of people to make sure that they don’t miss out on being founders or early employees of AI companies.

Copy LinkWhy now is the time to start a company

JONES: What you just said for me gives some hope saying that it could be that communities and people and talent that didn’t do as well in the last round might actually wind up doing better. They might see things that others miss and that the AI models haven’t been focused on. And is it possible there’s a world where communities that are used to disruption, disruption is not new in low-income communities, there’s disruption every day, they might be pre-adapted for some of these moments where things are changing. It could be that some of the communities that were disadvantaged before, they might be advantaged in this new era.

Is that just dreaming or do you see something similar in terms of people who’ve been on the outside, they might be able to do really well in this new era?

HOFFMAN: When we’re in these times of disruption, which obviously we are now, that means that the old power structures are no longer as firm or as strong. It doesn’t mean they’re non-existent, it doesn’t mean that there isn’t still privilege of which school you went to and which community you grew up in, but it means that that’s a much less of a rigid guidepost.

And so your ability to follow your imagination, to take risks, to be bold, don’t limit yourself. Times of disruption, it’s the reason why when you go to the old American mythos of going west, and the pioneering. Pioneering is the closest thing to entrepreneurship. The rules are shifting. So that’s when the opportunities are there, and that’s to lean in. That’s why it’s so important, the message that you guys are doing, so important.

JONES: Hey, listen, I am honored to be here. Let’s give a round of applause to these folks who we all love very much

LEE: Oh, thanks, Van.

BROWN-PHILPOT: Thank you, Van.

SAFIAN: Hey, it’s Bob here. I love Van’s hopefulness that AI will open opportunities for new communities, as well as Aileen’s description of Icarus companies, how valuations may be higher than is appropriate for what she calls hockey stick companies. I also love hearing Stacy encourage us all to work harder to bring those left behind by AI into the fold. As for Reid, well, I always learn something new listening to him. His obvious optimism about AI is paired with realism about how difficult the road to a better future will be.

What strikes me overall is how high-wire things are right now for investors and founders, for all of us, but as Reid notes, in times of disruption, all bets are off. That’s scary and fun and rife with possibilities. Here’s hoping we rise to the occasion together.

I’m Bob Safian. Thanks for listening.