How Davidovs Venture Collective (DVC) Reinvented Venture Capital with AI and 170 LPs | Nick & Marina Davidovs

when I was a founder of that loneliness from having to maintain a mask was was really hard to bear. Just finding yourself a community is is is really really powerful. It can help a lot. Yeah. Marina has like a whole talk on that.

Yeah. Find find your tribe. Hello, this is Alistister and welcome back to the Venture Variety Show. This is a podcast where I talk with founders, investors, and operators about how startups and the stories around them get built. Today I'm joined by a husband and wife team, Nick David and Marina Davidova, co-founders and managing partners of DVC, a seedstage focused investor. In this conversation, we get into what's wrong with the VC model today, how their LP network helped companies such as Perplexity AI, and they discuss why they believe founder health and resilience matter just as much as engineering knowledge, even in this 996 work culture that we're in. So, let's dive in and meet Nick and Marina.

Hi, thank you for having us.

Well, well, thanks for being here. been looking forward to talking with the two of you about your firm DVC, your co-founders and managing partners of the venture firm. Tell us tell us more about about the firm and your focus area.

So, it's a a new play in VC. We're trying to you know change things stir them up a little and the idea is that instead of hiring lots of analysts and partners, we hired very good LPs. So our LPs are very active and we have 170 of them. Most of them technical, most of them founders, most of them in Silicon Valley and they can provide incredible value to our portfolio, helping them to hire best engineers, solve technical problems, connect to, you know, large startups. A lot of them are very successful founders and we try to, you know, both foster this community with our human touch and also connect everything with AI.

Sounds great. Lots of fun things to talk about. Lot This overlaps with a lot of my favorite topics, AI as well as community platforms, value ad services. What What made the two of you want to start a fund in which your LPs are active with with your portfolio, with your seedstage portfolio? Where'd you get that idea from?

It was kind of long in the making. We started investing about 16 years ago together and we've been building startups and going back to investing and then building startups again. and our last startup Cherry Labs that was an AI camera company we had raised multiple rounds quite a lot of money from big firms small firms but what we noticed is that most we've seen these firms was their associates sending us a request for a monthly report in their own format while our angel investors whom we were blessed to have a dozen would come on a Saturday work with us at our office hack things together help us a lot And we were like, okay, if we really want to build a competitive venture capital firm, we need to provide that kind of value and we can only provide it by basically letting lots of angels invest and and play with startups.

I love that it came from your personal experience building Cherry Labs and and what you noticed it's I mean that's one of my I think one of the first questions I want to ask you. What what's wrong with traditional VC? Is it is it that

I think the The biggest problem is AUM scaling. So VC is historically a boutique business. It is a group of people who have experience who have the expertise are managing other people's money and on the other end they're trying to help build companies. Investing on early stage is very different from investing on late stage or in public markets. It's much less about finance. It's much more about understanding how startups are built, what problems founders face every day and scaling that is usually very hard because you cannot really hire people who can do that because they can they might as well start their own funds. So what successful firms have been doing is just trying to raise more money, more money, more money under management and at certain point it becomes a 60 or 70 billion AM fund that has to invest 7 billion on seed stage and for that they hire 500 partners

and just just to add a little bit the world is very diverse and as Nick mentioned originally it's a boutique game with people with very similar background and similar expertise and most of the time similar similar views and they usually select the same things and underestimate other things because it's not on their radar. So we believe that venture investing on the early stage should be also diversified because people and the world need different products, different services. and to do that we have to democratize access to the venture capital to give an opportunity to different people have a skin in the game and to have an ability to invest as well.

I have a pretty cool anecdote about it is about eight years ago I was sitting on on the investment committee of a seed fund there like a large latestage group that wanted to open a seed fund. So they invited me as as the like independent there and we were looking at an app u meditation app had beautiful numbers everything looked really good and on paper that was a no-brainer decision but everybody on the IC said yeah but I don't want to do it because I didn't get the app like me as a user I don't I don't feel I I understand why this this feels bad like I have a bad gut feeling about it and I looked at the room and there was seven wide Stanford for the lums. and and then and I show it. Look guys, I think I know the reason why none of you got the app.

Look at the app numbers. It's very easy. 85% of the users are women. How many of you are women? Zero.

Yeah, I think lots to say about that. Perhaps some diversity in the room would help out. And I assume your LP is a is a diverse group of

very of investors. Yes. Well, can you can you give an example more related to your own community of of how the LP community made a difference with a portfolio company?

So, a bunch of pretty cool ones. So, as you probably know, we are quite early investors in Perplexity AI, which is now a huge deal.

I've heard of it. Yes. And the company is is doing really really good. So we managed to not only help them hire about 16 people in the first year after we invested through our community, but we also they sourced two of their acquisitions. So the first two out of three companies they acquired were from our portfolio.

Oh, no kidding. Okay. So the introductions were made somehow or they they were aware of it. You invested in Perplexity as a when it was a seed stage preed. Yeah, a little a little bit later after seed, but we actually entered by selling. Everything was overs subscribed, but we were able to sell them one of our portfolio companies get on the cap table and then they allowed us to invest more from there. I think they built well, we've built some reputation as as people with strong technical backgrounds that we understand the difference between really cracked engineers and people with good resumes. that's that's why whenever we introduce them to somebody they at least look at it very seriously.

How deep does the LP assistants work with the portfolios?

Yeah we we we never invest angel size check. So our idea for a founder to they can see us as an angel investor

but on the other end we're Swiss Army knife of angel investors. So whatever they need we'll find an angel who can help with that. Mhm. anything else that any other examples? You say you're the Swiss Army knife of ideas.

So hiring I think is our strongest perk and for you know our focus is repeat founders and preede and seed whenever they hit the you know the holy grail of product market fit their number one problem is usually hiring. For example, a company called Doctronic. They're we invested I think in their preed. They just raised a really good seed and they they sent us a job vacancy which we posted in our community got 11 clicks. They ended up hiring three after just a week. And other than that we can also facilitate partnerships with hyperscalers, cloud companies like Microsoft, OpenAI, Nvidia like we got insiders in every single one of these companies. And this also gives us really cool way to do due diligence very very quickly. So we usually use AI and our community to do due diligence as much as we can before we actually take a call with the founder.

And it's much easier to ask somebody who's built two companies in this field about the actual market size than than relying on an analyst doing some googling

in addition to hiring. Is are there other services that you help with?

Yeah, ahead Marina.

Since we have a lot of like LPs, most of them are engineers and founders themselves. some of them like founders of unicorns. So they actually already had this journey and can advise at different stages because they they just been there just just just went through like all these milestones and the experience is very valuable not only hiring but just yeah as Nick mentioned partnerships and just an advice what to focus on and again like since since our LP is quite had experience and have like very deep expertise. Most of the time they do not only like answer and help is ask from the company. They understand what they truly need, not what they are asking for, but what they really need.

We can also help with fundraising quite a lot. I'm just not, you know, stressing that out because pretty much every other VC firm claims they can do that. We, however, have a bunch of GPS of bigger firms as our investors. So they see our pipeline, they see our portfolio, and a lot of times this can help like preempt around.

That's great. What What do most startup founders want from a VC? What what's their big pain point when when you're meeting with them?

It really depends on the founder profile. Usually the three questions we like to ask ourselves is, can this person raise enough money if it's capital intensive? Can they hire the best people? And can they sell to the best customers? because there's, you know, a lot of times there might be a really cool product team that is building something extraordinary, but they don't have any experience in fundraising. So, we'll we'll help them populate their spreadsheet with investors that are ready to talk to them.

Mhm.

If they need more customer introductions, lots of our LPs can be customers. For example, for us, it's super easy to vet anything related to banks because we got a bunch of people who are SVPs of data or CTOs of large banks and they can just talk to that and they say yeah like I want to give them okay for a pilot that is a very strong signal for us to invest and also a great help for a company.

It's do you have a typical founder profile where where are startup startup founders coming from? So all 130 investments we've done is repeat founders, somebody who built something, raised VC money for something ideally here in the US in Silicon Valley. and a lot of them are technical because of the nature of you know the field we invest in AI. So it really helps to be technical. So the profile is is a second third time founder. They know what they're doing. They see that this they cannot just sit on the sidelines. even if they made a really good exit, they just cannot sit on the sidelines while this AI revolution is happening. They see an opportunity, they they hire a really cool starting team and they jump at it.

What advice do you have for founders, say whether they're repeat entrepreneurs or first timers? What what advice do you give to the founder audience?

It's not going to be easy.

get ready for a ride. What's that, Nick?

yeah, just brace yourselves. It's

brace yourself. Yeah, Marina may may maybe can add a lot of she she has a really cool like health and mental health routine that helps others stay alive.

Yeah. Well, the reasoning is very simple actually. when you're building something nowadays, especially in AI, you have to be very focused and you have to be very like adaptive to the changes that are happening almost every day. the level of uncertainty is very high and in order to like cope with all of that, in order to like work for that despite of everything and react quickly and try different hypotheses like you have to be ready mentally and physically and usually we underestimate how our hormones and physical state influence our decision making. So in order to like to to to focus on like on your work on all of you doing you have to neglect negative sides of carbons and under sleeping and other stuff that just like be attentive what you're doing be attentive what what what are you like what are you eating don't do don't drink alcohol have enough amount of sleep and physical exercises and that will help you to conquer the Oh, I like that.

So, you don't advocate the what is it? The the 996

mentality. We work.

Yeah, we work like that. But in order to do that, only way to do this productively is that like other like free time, you have enough time to relax, spend with family, sleep, and other stuff. It's no way you can do 96 and party at night, drink alcohol. I don't know like over with sugar and other stuff.

No, I like that. so on top of the you know maybe the engineering chops or the you know the knowhow of of companies you need to be resilient, you need to be mentally fit. Do do you do you provide any any type of mental health services for the portfolio companies other than other than you know the feedback you're giving now? Sometimes we do and it it could it could come in different ways. I don't know sometimes we do a series of webinars from our LP just focus for the people who close to the burnout. So this helping them to understand their state and to like work more productively and other stuff. Sometimes it's just another our founder who is PhD in computational biology also like she was doing webinars on like

the science behind how metabolism affects our mental health

like metabolic syndrome and yeah

oh excellent. So the different started

yeah different founders need different ways to be persuaded and while the thriving feeling of you know this like I got product market fit my customers are you know my servers are collapsing there way too many customers I cannot handle them all kind of puts everybody in overdrive but that overdrive can maybe last two 3 months and then people get burnt out the only way to sustainably work 996 or more cuz we we we work more. We work like 80 90 hours a week. That is by rigorous schedule, exercise, food, never letting this slip because people tend to underestimate how important is the founders's energy level for the company.

Yeah. And this is not a short short-term game. This is a long-term game. And in order to like to fix it on a long term, you should be very consistent at least like with like all all of the things we mentioned and

yeah I agree with Nick about the energy level like founders energy influence everything like how they're approaching customers how you're talking to investors how you're talking to your police and that's number one priority for the founder

co-founders and team read that subconsciously and and they try to mimic it. So they're they're using their mir mirror neurons to to basically act the same way as the founder acts and and then the problem if if founder is burnt out or founder is sad or founder is depressed the whole company gets depressed.

Mhm.

This you know reality distortion field stops working or it distorts reality on the other way.

Yeah. No absolutely I could see that impacting an entire startup entire company. Is is 70 80 hours sustainable? I guess you're Yeah, go ahead.

We've most of our portfolio companies work like that

really

and I think it's just the time we're in the competition is intense. The pace of change in science is incredible. But last two weeks we had more progress than in the last two months. Last two months we had more progress than two years. In two years we had more progress than 20 years.

Mhm.

It's an exponent. That goes back to, you know, maybe the no alcohol, no, you know, eat right, take care of yourself and the downtime. Is that how you balance it?

Yeah. So, we work together, so it's a little bit easier for us. So, we can keep working and discussing work while we're also simultaneously taking care of our kids or, you know, household chores. I don't know if any other fund can can have like an invest like an partners meeting while doing the dishes. We can. Excellent. Who does the dishes? Both of you?

It's It's technically my chore.

Okay.

But yes, everybody everybody chips in.

I would love to shift and talk more about AI. You call yourselves an AI enabled VC and you invest in AI obviously. You know, how does how does AI and community and how how does your focus all come together? For example, a portfolio founder sends us a monthly note. We never require any specific form because agents don't care. They can read an email and and then they can take all of the numbers and put them in our database so we can track companies better or maybe return benchmarks to them and say, "Hey, you're doing really well on this number and you're not really tracking this on, let's say, customer acquisition costs. This is this is how your competitors are doing." but also it we can read into what they're asking for, what they might be needing and agents are really good at remembering the profiles of 170 of all of our LPs and not only that they they also know who they're connected to and what is the expertise of their network.

So these are tens of thousands of people combined that our agents have in their memory and then they can direct us towards the most valuable introduction we can make.

Do you monitor those metrics of your portfolio companies all the time or or just when you're fed

I we found a really really unobtrusive way to do that. So basically agent res resorts the portfolio all the time

and every time I open the like our platform it just sorted from like companies that have to be prioritized for my human touch either it's a company that is going to be raising another round soon and they're doing really really well and they need help with something so we cannot afford to miss that opportunity. A lot of times we like from our second fund, we we would approach a company and say, "Hey, it looks like you're going to go after another round in three to four months. Your runway is a little short. Why don't we give you a million now,

give us a cap,

so you'll have a much healthier runway. We'll guaranteed participate in the run, maybe even have a markup on that. and we'll also be able to help you more."

And are you using you're also using AI to source deals, right? Source new potential deals.

Mostly we use our community for that. Okay.

Yeah. So, we're not sourcing, but we have like 100 signals to check the companies that are already in our pipeline

and then using AI to to

conduct due diligence and

Yep.

Yeah.

and so forth. Is this a model for the next wave of venture capital? You're the two things that you're that we've been talking about the AI focus as well as the community.

We hope so.

Yeah. I'm not like I don't sure about the community. stepping community is not that simple to crack like for sure the trend is to implement AI on every level and we can see that from the biggest fund to emerging ones that they are like trying to do that in terms of the community it's it's I think it's more difficult because it's it need like a lot of time and energy to build a network to manage that like well some people are like more introverts that it's not about them.

Going back to your question whether it's going to become a trend, we hope to contribute to this by open sourcing a lot of our playbooks, processes, how we do things, our software to enable other angels to do the same. We don't really compete because our check size like we whenever lead rounds our check size is pretty small. But what we want to do is that we want to get more value to founders. They will of course use mega funds as as this main source of capital. But other than that, we want them to get better odds at succeeding, better odds at, you know, getting somebody who's going to be that pivotal investor who's going to bring their best hire or bring their best customer.

I never mentioned you two are based in, you live in San Francisco, right? Is

close to it. Yeah.

Oh, close to

San Francisco Bay Area. Yeah,

San Francisco Bay Area. again, kind of going back to, you know, everything we've talked about. Have you noticed a certain mindset here in San Francisco? What What have you noticed lately? There's been a lot of I mean, I live here as well, a big focus on AI, on working, getting things done, but taking care of yourself. It seems like you're you're describing the region.

It is, and it's really, really good. It feels good to be part of this huge wave. Our daughter put it, I think, in the best way. So it was early days of perplexity. There were maybe like 20 people and I had to like we were in the city so we stopped by their office. It was a Saturday night and the office was full of people and we took we took our daughter with us. So while we were talking to Arvin and Dennis she was just like classic teenager on her phone the the whole time. And then on on the way down in the in the elevator she was like okay Dad now I understand what you mean when you say product market fit. I was like, "Oh, please do describe this. You know, scholars haven't agreed on a definition yet." And she's like, "Well, I can I can tell you how it smells.

It smells of people who haven't been home for a week." I was like, "That is pretty accurate definition of a product market fit."

Yeah. And this energy is insane. It just like feels really, really good. It's like everybody has a goal, everybody has a mission, and and and they're working and they're creating things that are beautiful. She really picked up on the the the the details there. Very very good for her.

Good news.

Yes. Well, any final thoughts as we wind down here on, you know, founders tuning in or or others, you know, on on the community that you've created? Any final thoughts? I think maybe an advice for founders cuz when I was a founder of a startup last time that loneliness from having to maintain a mask was was really hard to bear. Just finding yourself a community is is is really really powerful can help a lot. Yeah. Marina has like a whole talk on that.

Yeah. Find find your tribe.

That was Nick and Marina from DVC. I really liked how they highlighted the difference between other firms and what they call their Swiss Army knife of angels model in which an active LP community can help with everything from hiring to customer intros. Their emphasis on founder well-being also stood out to me and I like the antidote from their teenage daughter about the smell of startups. So, if you enjoyed this episode, please hit like and subscribe to the Venture Variety Show on Substack and YouTube and share this episode with someone you know who might also enjoy it. For now, thanks for listening.