Josh Stein, Founder of Threshold Ventures
Backing unreasonable founders
This week we had the pleasure of meeting Josh Stein, the Managing Partner of Threshold Ventures.
Here are some takeaways from our conversation.
Josh explained that startups require a level of audacity and ambition to achieve their full potential, and unreasonable founders are often the ones who are willing to take the most significant risks and push the boundaries of what's possible.
Josh believes that a healthy dose of unreasonableness can be a critical factor in the success of a startup.
The product's stickiness might go beyond just tech, especially if it’s b2b software. Complying with new standards and growing to the verticals based on customers' needs - that’s what creates stickiness, so the product shouldn’t necessarily be “cutting edge tech” all the time. Josh recalls investing in [..], where one can think about substitutes and cannibalization at the moment, but the company proved the value long term by embedding themselves in the customer’s tech and therefore increasing switching costs.
The triple-triple-double-double rule of the SV startup scene creates wrong incentives to burn and grow vs. better understand the customers and improve gradually. Of course, there is a market for each, but the most successful investments of Josh didn’t follow this rule - they were growing progressively, providing better value for their customers without making redundant efforts to grow relentlessly.
Unlike many VC firms that aim to scale by adding more partners and raising larger funds, Josh has intentionally kept Threshold Ventures a small, focused team. He explained that the early-stage venture model doesn't necessarily scale, and that adding more partners can dilute the focus and effectiveness of the firm.
Instead, Josh believes that the key to success in the early-stage venture space is to stay nimble and agile. By keeping the team small and focused, Threshold Ventures can move quickly to identify and invest in promising startups without getting bogged down in bureaucracy or decision-making processes.
Furthermore, Josh emphasized that keeping the firm small allows him to maintain strong relationships with the startups in his portfolio, providing more personalized support and guidance as they navigate the challenges of building a successful company.