20VC: Do Rich Founders Make Better Founders | The Best Performing Fund Would Only Back YC Founders on Their Second Time | Why SPACs Will Come Back | Why Short Sellers Should Be Banned | Is Trump Better for Business than Biden with Jason Wilk @ Dave
Summary
In this episode of The Twenty Minute VC, Jason Wilk, founder and CEO of Dave, shares a detailed retrospective on his company’s tumultuous journey through public markets, especially their SPAC IPO experience. Dave went public via SPAC in 2022 with a market cap of $4 billion but suffered a dramatic valuation drop to $50 million due to poor timing and negative market sentiment toward SPACs and fintech stocks. Despite this, Dave executed a significant turnaround, driven chiefly by strategic investments in AI and operational efficiencies, ultimately achieving over 900% growth and becoming CNBC’s best performing financial stock in 2024. Jason discusses the critical importance of timing when going public and reflects that Dave was ready six to twelve months earlier, highlighting the complexities startups face in IPO or SPAC timing decisions. The conversation also addresses founder economics, arguing that richer and second-time founders have distinct advantages in taking risks and attracting investment, which aligns with growing VC focus on experienced entrepreneurs. Early fundraising challenges are highlighted, including Jason’s experience of securing seed capital under strict conditions set by Mark Cuban, illuminating the differences in capital environments over the last decade. Tools like Coda are praised for improving startup team alignment and productivity by consolidating workflows, reflecting evolving collaborative technologies. Jason reminisces about the evolution of Y Combinator and startup ecosystems from smaller, personal environments with modest checks to today’s high-velocity capital landscape. Public vs. private market dynamics are debated, noting that direct-to-consumer companies like Dave can benefit significantly from retail investor enthusiasm that boosts valuations beyond traditional metrics, compared to enterprise businesses which may benefit from remaining private longer. The episode delves into how SPACs, despite being unfairly demonized due to the influx of low-quality deals during the zero-interest-rate period, remain a valuable vehicle for companies seeking capital and certainty in turbulent markets. Lastly, the episode touches on mission-driven entrepreneurship as a key to attracting talent and sustaining startups through adversity, and the challenge public companies face in balancing short-term capital market pressures with long-term innovation investments.
Key Takeaways
- 1Dave's public market journey via a SPAC IPO illustrates both the risks and resilience associated with going public through this mechanism. The company’s valuation collapsed from $4 billion to $50 million shortly after the IPO due to negative market sentiment and timing, but a strong turnaround fueled by AI-driven operational improvements drove a 900% increase, reclaiming over $1 billion in market cap by 2024.
- 2Timing is paramount when choosing to go public, particularly via SPACs. Jason Wilk believes Dave’s IPO came six to twelve months later than optimal, missing a window of favorable market sentiment, which significantly impacted initial investor support and valuation. This delay demonstrates the strategic importance of aligning public market exits with broader economic cycles and investor appetite.
- 3Investor preference heavily favors wealthier and second-time founders due to their proven experience and ability to take bold risks. Jason Wilk argues that second-time YC founders with successful exits represent some of the best investment opportunities, as they possess the capital, knowledge, and confidence to ‘swing for the fences,’ often warranting more favorable funding terms like uncapped convertible notes.
- 4Early-stage fundraising used to be notably difficult, requiring significant founder persistence under stringent investor conditions, exemplified by Jason’s experience with Mark Cuban capping his salary at $30,000 until profitability. This financial discipline pushed capital efficiency and resilience at a time when seed capital was scarce, contrasting sharply with today's larger and faster venture funding flows.
- 5Collaborative all-in-one tools like Coda significantly advance startup team alignment and productivity by centralizing documents, workflows, spreadsheets, and applications into a single workspace, enhanced with AI capabilities. This integration streamlines content planning, scheduling, research, and notes, reducing inefficiencies from tool-switching and supporting distributed teams' agility.
- 6Y Combinator and the early-stage startup ecosystem have transformed profoundly since 2010, evolving from a small, intimate community with modest seed investments and close founder interactions with tech luminaries, into a large, competitive, capital-rich environment. Early demo days and capital raises were more challenging, with investment sizes being magnitudes smaller, reflecting a less mature and less crowded market.
- 7Going public decisions hinge on company type and capital market dynamics; for direct-to-consumer companies like Dave, public markets offer retail investor enthusiasm that can materially elevate valuations beyond private company multiples. However, going public also exposes companies to short-term Wall Street pressures that might impede long-term innovation, suggesting a strategic tradeoff that must be carefully managed.
- 8SPACs, despite widespread negative stigma driven by an influx of low-quality companies during the zero-interest rate era, remain a functional and sometimes preferable pathway to public markets, particularly for younger companies seeking speed and valuation certainty. Properly managed SPAC deals with credible sponsors and quality investors, like Dave’s, demonstrate the vehicle’s enduring utility.
- 9Mission-driven entrepreneurship, as exemplified by Jason Wilk’s commitment to leveling financial services for everyday Americans, is essential for sustaining startups through adversity and attracting talent. A clear mission acts as a rallying point for recruiting and retaining employees, shaping company culture and longevity beyond pure financial motives.
Notable Quotes
""In 2022, we SPAC'd and went public at $4 billion. Excitement soon waned, our market cap dropped to just $50 million. They lost an incredible 98% of their value. I had no support in my stock. We were f***ed. But the turnaround has been one of the best on Wall Street. They've increased market cap by over 900%. The investments, again, in AI is really what led to a lot of the profitability.""
""Do richer founders make better founders? I'd say yes. If you were to have a blank check VC fund and just wrote a blank, uncapped convertible note into every successful exited YC founder for their second company, you'd have probably one of the best VC funds on the planet.""
""I had to try and convince Mark Cuban for a year to get this small amount of money. Back then, Mark actually capped my salary at $30,000 a year until we could get the company profitable. Like that's how different it was back then to raise capital.""
""Coda is an all-in-one collaborative workspace that started as a napkin sketch. Now, just five years since launching in beta, Coda has helped 50,000 teams all over the world get on the same page. Instead of bouncing between different tools, we can keep everything from guest research to scheduling and notes all in one place, which saves us so much time.""
""Back when I did YC in 2010, it was still Paul Graham and Jessica. Paul was still cooking us dinner in a crock pot, serving us like vegetarian chili on Tuesdays. It was a much smaller group. Mark Zuckerberg would come in and talk to 20 of us. You get the Google founders coming in. It was this really intimate experience. But it was also a different time when this angel investing was starting to gain momentum. Our demo day was very unsuccessful from a YC standard perspective. And so to go back in and get a bigger check, mind you, the check size was only $17,000 back then for 6%, not whatever it is today.""
"Tesla, I'd argue, would not be a trillion dollar private company, but because of sort of the cult generation they've developed, the Tesla owners that buy the stock, they're the ones that have pushed it above and beyond any reasonable EBITDA multiple that they would be trading at as a private company."
"It's nine to 12 months of work to build the S1, not to mention all the stuff you have to do to build out the finance, compliance, accounting functions to get there. If you're a younger company going public on the earlier side, the SPAC is an amazing vehicle to give you a lot of confidence."
"We've gone through one of the most difficult times of my life to get us back here. SoFi could have done a traditional IPO. I think you would have seen this be a much more pervasive way for good companies to go out. So if SPACs are actually a more functional and efficient mechanism than people give them credit for, why have they been so ridiculed?"
"The word SPAC is almost a poisonous word. Why is it so badly tarnished? Just the sheer amount of low quality companies that went public via that. I mean, access to capital was, when you went to this zero interest rate environment, when access to capital anyone could raise, you were having companies with barely any revenue, barely any business model that were going public via this structure."
""Honestly, I don't regret going out via SPAC. I think we just went public too late, to be honest. I mean, we saw them—" Interviewer asks: "You went public too late?" Wilk confirms emphatically: "Too late. I think the company realistically was ready to go public probably six to 12 months earlier. And we were waiting. We wanted to find the right sponsor. We were trying to ensure a few things were right within our sort of how we were forecasting our business.""
""The stock completely fell apart April 2022 before our lockup even expired. All of our PIPE investors from our IPO bailed before our lockup expired. FinTech became a bad word. SPAC became a bad word. Unprofitable growth company became a bad word. We were sitting in the worst possible place of all time. Had I gone public nine months earlier, we would have had the chance to raise potentially more capital. We would have been able to turn over our earlier shareholders to bring more longer-term capital in.""
""The difference this time around was really swinging for the fences on a bigger problem. I think the first time around I was going for a niche business, something that I knew we could get profitable quickly. So from that sense, it was a little short-sighted. We never could build a really massive business and we didn't want to raise a lot of additional capital either. One, because it was hard. And two, I didn't like the idea of sitting behind a bunch of preferred equity. Dave, and this was sort of like my nest egg. I knew that every dollar of cash that the company generated was 40% mine and I really wanted to protect that. The second time around I had some money in my pocket. I had a real bone to pick with a major industry.""
""I had no support in my stock. We were fucked. And they had a decent amount to do with that. So we have this moment where we're like, okay, we're at the center of a load of challenging tailwinds. The stock goes from 4 billion on IPO to 50 million.""
""I never started the company to make a lot of money. I started the company because I believe in this mission to sort of level the financial playing field for everyday Americans paying all these overdraft fees in their account. I would advise any founder to really double down on having a very set mission for the company because it's a really important way to recruit people to bring them into the company.""
""We went public too late, it was a big mistake... If we get a stock price from $1 to $5 to $20 to $80 to $100, you're going to hit all these new targets. I think we probably minted more millionaires at the company as a result of the performance stock units than we did in the actual IPO process.""
Episode questions
What were the main reasons for Dave's massive post-SPAC market cap decline and subsequent recovery?
Dave went public via a SPAC during a period when fintech and SPACs were facing negative market sentiment, leading to a 98% drop in valuation. A lack of support from initial investors after the IPO and waning excitement contributed. However, with strategic investments in AI and operational improvements, the company managed to improve profitability and regain investor confidence, evidenced by a 900% market cap increase. This journey underscores not just the financial market forces but also the importance of technology adoption and business execution in turnaround success.
How does founder wealth and prior experience affect their ability to succeed and attract investor funding according to Jason Wilk?
Jason Wilk believes richer founders and those building second companies after successful exits have a distinct advantage. They can afford to take bigger risks (swing for the fences) and gain investor trust more easily due to their track record. Investors might back such founders with more favorable terms, such as uncapped convertible notes. This dynamic creates an 'unfair advantage' but also acknowledges the practical benefits of experience and accessible capital in driving startup success. It reflects a common VC strategy increasingly focused on seasoned entrepreneurs.
What role did Mark Cuban play in Jason Wilk's first startup, and how did that experience impact Dave's founding?
Mark Cuban was Jason's first check in his early startup, but with stringent conditions like capping Jason's salary at $30,000 until profitability. This financial discipline was unusual compared to today's fundraising environment and created a forcing function driving capital efficiency and persistence. The experience of managing under these conditions motivated Jason and shaped his approach to building Dave, including the decision to start Dave after that startup. It highlights the importance of investor-founder dynamics and controlled growth in early-stage ventures.
Why does Jason Wilk believe they went public too late, and what would have been the ideal timing for Dave's IPO?
Jason Wilk acknowledges that although he doesn't regret choosing the SPAC route to go public, the company was realistically ready for IPO six to 12 months earlier. The delay meant they entered a less favorable market environment during negative sentiment toward fintech and SPACs, which contributed to poor initial stock performance. Earlier timing could have captured more investor enthusiasm and possibly maintained a stronger market cap post-IPO. This insight stresses the criticality of timing and market conditions for public offerings.