Brad Svrluga

The through-line

The argument Brad Svrluga keeps returning to is that capital itself is worthless as a differentiator. "All money is green" [1], and in a market where good founders have options, the only question that matters is what else arrives with the check. Everything else in his thinking follows from that premise: the decision to restrict Primary Venture Partners to New York City, the decision to build a team where more than half the people never do deals, the insistence that the founder matters more than the market, and the venture math that governs which founders are worth backing at all. He has been consistent that firms must choose a side, describing "a kind of barbelling of the industry where people are either going heavily into this like I'm going to really invest in operational impact and be at high touch and hyper supportive or the other end of the spectrum is we're just writing checks and moving on" [2]. Firms stuck between the two he compares to JCPenney, a brand "that tried to be everything to everybody without any specialness to them" [2].

The position hardened over time rather than changing. He entered venture in late 1999, "about 15 minutes before the bubble burst" [4], when "it just seemed pretty easy" [4], and worked at High Peaks Venture Partners in an era when "if we got to yes we would be able to buy equity in that company" [1]. By the time he and Ben Sun founded Primary in 2013 he was "firmly convinced from 10 years in the business that there was a better way to do early stage investing seed stage investing in particular that it involved a lot more commitment of resources and and operating expertise to to help companies" [4]. Primary's structural rebuild of the seed model is the subject he returns to most often [7][8][10].

On what a venture firm actually sells

Asked what his product is, his answer is deliberately unglamorous: "in the simplest sense I sell capital and I sell capital in exchange for equity" [1]. But he immediately complicates it, because the transaction is symmetrical and he has customers on both sides. He has to raise money from investors who believe in his plan, and those investors "all frankly have easier simpler safer options than investing in venture capital," so when they take the risk "they need to have expectations of generating pretty superior returns" [1]. Success in the business, he says, "is defined only by that your ability to generate returns for your limited partners is is your ticket to staying in in business" [1], with a target of returning two and a half to three times their money or better [1]. The story he tells LPs and the story his founders tell customers have to ring true on both sides of the same equation [1].

Because the capital is commodity, the pitch has to be about the rest of the offering. His ten-second version to a founder is comparative: most competitors have four or five person organizations, Primary had eighteen and was heading to twenty or twenty-one, "and we're in the same business and we're writing the same checks and we're buying the same equity but what we're doing is investing a lot more in services and support" [1]. He frames the choice for a founder as whether the investor shows up "with a cavalry rather than it's just me and I'm a nice guy" [1].

On geography as a constraint that buys you something

New York was a bet on an anomaly. He argues it was "a sort of a historical anomaly that new york hadn't been more of a center of the tech community," given that any software company selling into financial services, media, advertising, fashion, pharmaceuticals or consumer packaged goods finds those industries either headquartered in New York or with their second or third biggest market there, alongside "such a density of expertise and customers and employee bases to hire from" [2]. The city had plenty of capital but "very very little good dedicated early stage capital and very little seed stage capital in particular," so the move was to plant a flag [2]. It is also, he notes, brutally competitive for dollars chasing every good opportunity, "the second most competitive market in the country certainly and probably one of the five most competitive markets in the world," which means decisions have to be made quickly [1].

The constraint is the point. Limiting themselves geographically "enabled us to do some things operationally that proved uh really impactful for our portfolio companies" [2]. Concretely: before the pandemic he could reach every single portfolio company from the office on 24th Street within twenty or thirty minutes [2], and the networks Primary builds around hiring, advisors and problem-solving are all in the founder's backyard [1]. The clearest example is his charge to the recruiting team, which is to hold a database of "the top 10 of all talent across all functional areas in the tech community in new york city" [1]. He is candid that they had not achieved it, and equally clear that the ambition is only coherent inside one city: try to know the top ten percent of demand generation people in Boston, Austin, Seattle and New York simultaneously "like you have no chance" [1]. The sacrifice of not looking at deals elsewhere is what creates the product [1].

On portfolio impact

What Primary calls portfolio impact is a deliberately disproportionate investment in non-investing headcount, led by seasoned tech company operating executives who became partners and spend their time advising portfolio companies [2]. At the time of the later conversation the firm was heading toward a thirty-two or thirty-three person team, "more than half of which is this portfolio impact team that is diving deep and doing real work in the portfolio" [2]. The functions are tooled to the specific problems of the first couple of years: three full-time recruiters building candidate databases, a go-to-market team working on how companies acquire their first customers and how they structure and incentivise the organisation to do it, and strategic finance, which he describes as "building the kind of financial foundation and business model stuff the right way from the get-go" [1].

He does not treat the alternative as illegitimate. Of Tiger Global, the hedge fund that moved a large part of its business into late and mid-stage venture at astonishing volume with very few touch points, he says "there's there's nothing wrong with that and they're doing well and they're making money and driving returns and they built a great brand it's just a different thing" [2]. What he rejects is the undifferentiated middle [2]. Geography and portfolio impact, in his account, are "very much mutually reinforcing" [2].

On backing the founder ahead of the market

"We are much much much more focused on the founder than the other," he says, calling it a lesson he has "relearned in some new way every single one of those 20 years" [2]. The reason is stage. The median company Primary first invests in has about three employees and often has not launched a product [2], and the firm will go as early as one individual with an idea [2]. At that point "everybody involved literally doesn't know what we don't know yet," so being "overly enamored of the market or the product" before you have seen whether "the dog's eating the dog food or the dogs hating the dog food" is a mistake [2]. What you can assess is whether these people will be "exceptional at constantly reevaluating the situation that they're in being prepared and being nimble and flexible about pivoting be that a you know five degree pivot or a 90 degree pivot or a 180 degree reversal" [2]. This is the point he says he most consistently drives into younger investment team members [2].

The specific traits are three. First, raw horsepower: "the amount of twists and turns these companies take you have to have a very very nimble brain and be an incredible problem solver," and while at scale "raw execution capabilities become way more important," in the early weaving-through phase intellectual horsepower matters enormously [3]. Second, grit, which he treats as evidenced rather than claimed: "you've got to have been knocked down several times in your life and gotten back up and dusted yourself off or at least have traits that demonstrate a likelihood uh to be good at that" [3]. Third, the one "a lot of founders don't like to admit is as important as it is," salesmanship and storytelling [3]. Primary's thesis work also screens for companies solving real problems with SaaS products [5].

On the three unnatural sales

His signature framework is that "founders repeatedly have to sell three different constituency on a on a sale that they should never sign up for" [2]. The first is employees: join my startup, take a sliver of equity and a pay cut, and when you tell your parents they will ask why you left IBM, and "like you probably shouldn't take the job because it's probably gonna fail" [2]. He frames this as the difference "between building a team of b players and building a team of a players" [3]. The second is capital, and here he is unsentimental about his own product: "we lose all of our money third of our time," and doing that is compatible with best-in-class returns [2]; elsewhere he puts the range at "a 25 to 50 percent chance that we're gonna lose all of our money" on any new investment [3]. Since a rational investor "should probably not invest every time," the founder has to be genuinely persuasive, and the better they are, "the more success you'll have over time raising money the less time you'll have to spend raising money and the whole dilution you'll take over time" [3]. Raising the first round is not the end of it either, because the sale has to be made "again and again and again to people who are inundated with opportunities" [2].

The third is customers, and it is the one he says he drills hardest. The buyer is being asked to shift a critical business process away from something that is "at least is not going to get me fired if I continue to do it the same way," and if the new thing fails, they lose their job [2]. Hence the line he repeats to founders: "you're not selling software to companies you're selling software to people with mortgages with kids who you're saving for college" [2], or in its compressed form, "you're not selling just a product to a business with a problem you're selling a solution to a human being with a job" [3]. When an interviewer suggested the real category was leadership rather than sales, he accepted the widening: "it's evangelism it's which is like getting people to change what they do and how they do it" [2]. He has also spoken directly to founders about how to approach seed fundraising [11], and stresses that entrepreneurs need to understand an investor's goals and time horizons well enough to judge whether fund and founder are actually a match [2].

On venture math

He treats fund arithmetic as something founders should understand rather than resent. Primary's first checks run from about five hundred thousand dollars up to four or five million, with a sweet spot around three to three and a half [2]. Out of a $155 million fund, "every time I write a check I need to genuinely believe that I can return half the fund or better in one shot," precisely because of the known failure rate and the long tail of middling outcomes that return one and a half or two or 2.7 times [2]. Doubling four million into eight "doesn't get you there" when the job is turning 150 into 450 [2]. He worked this through with an angel who criticised him for passing on a company headed for a $250 or $300 million exit: at that outcome, "then I need to own 30 of that and we're no no founder is ever going to sell me 30" [2]. Hence the market-size threshold. He looks for "two billion dollar markets and up," because "hardly anybody" achieves 25 percent share, "you need to be able to succeed on single digit digit market share," and the more capital-intensive the business, the bigger the market has to be, since the investor writing the $50 million check later may need a $10 billion market [2]. Scale, in his phrase, "gives you all sorts of degrees of freedom towards how you exit what the outcomes can look like and you don't have to make heroic assumptions about market share" [2].

The same arithmetic explains a structural change in seed. Firms that once split rounds collaboratively, including First Round Capital and other New York seed peers, have all grown, and "as we've grown it's become harder to be collaborative," because a $1.3 million check that returns 20x produces $26 million, which is simply not enough against a $155 million fund [2]. Everyone needs to write bigger checks to move the needle on their own fund [2]. He also observed a market at the other extreme in early 2020, "super super hot" with a lot of capital, which is exactly what gives good founders choice [1].

On cycles, cash and the bubble he walked into

He has lived one full collapse and expects another. The unwinding of 1999 took far longer than people remember: the March 2000 NASDAQ drop was a shock, but billions raised in 1998, 1999 and early 2000 were still sitting on the sidelines, "and so we kept doing deals in um through the balance of 2000 and early 2001," until 9/11, when "it's not just last call anymore like everybody's getting kicked out of the bar" [4]. Anything without a sound business model and a path to profitability "was toast," and what followed was "a couple of years of full-on triage mode" [4]. Even companies they fought to save needed more money, and the 2002 to 2004 capital that arrived was opportunistic, so "we might have gone from owning ten percent of something to owning one of something" [4].

The single lesson he draws is blunt and, he concedes, "relatively useless over the last few years": cash is king [4]. That means knowing how much you have, controlling burn, understanding how to dial it back and what dialling back would cost you, and starting a raise early enough that you never do it from distress [4]. He notes that in 2008 and 2009 even really good companies were subject to those rules [4], and warns that a large part of the ecosystem has now spent twelve or thirteen years without a genuinely bad macro environment and is "kind of out of touch with the reality that is inevitably going to come" [4], having already seen "some echoes" of 1999 in the recent market [4]. His view of the dot-com failures is that most were timing errors rather than bad ideas: "chewy is effectively pets.com instacart is a effectively web van," and "it was all too early back then" [4].

On why a thesis has to describe a real market

The High Peaks story is how he learned that a plausible thesis can fail on geography. The Village Ventures logic was that connectivity would let people build great companies anywhere, that intellectual capital sat around research universities and large corporate R&D, and that what was missing in those places was native early-stage capital, since seed investing "is just really hard to do from across the country" before modern remote tools [4]. Because back-office costs "don't look that different if you're running a 20 million dollar fund or a 500 million dollar fund," the answer was to centralise them and network a set of regional funds together [4]. Upstate New York looked strong on paper: Rochester with the University of Rochester, RIT, Kodak, Xerox and Bausch and Lomb, Cornell in Ithaca, Rensselaer Polytech in the Capital Region, plus IBM's and GE's global R&D headquarters and a growing nanotechnology and microchip design centre [4]. "The flaw in our initial thesis," he says, was that these sites were two or three hours apart with no real connectivity, and labour and talent did not move seamlessly between them: "it wasn't a market it was a collection of little ones each of which were truly too small" [4]. They made money on individual deals in Rochester, Binghamton, Troy and the Hudson Valley, "but it became clear to me pretty quickly that it wasn't going to add up to enough" [4].

The second failure was alignment. He turned down the river toward New York, did his first city deal a couple of years in, and eventually did effectively all his work there, but his partners were eleven and twenty-one years older and were not going to relocate their base of operations [4]. Two funds were raised and the outcome was "fine, not amazingly," though it gave him a New York track record [4]. When he considered joining an existing firm around 2012, he ruled out being "the new york outpost for something that was based in boston or the valley" on the view that "you kind of got to be at home base if you're going to be successful," and found the firms courting him "weren't really committed to doing things particularly differently," wanting a younger partner to run the same playbook [4]. That playbook he describes as "four white guys in their you know 40s and 50s and a couple of junior people in a really nice office with a bunch of admin support and not a lot of hustle," a model that had been good enough to generate returns for decades [4].

On why venture rather than operating or consulting

He is explicit that he was not wired to be a founder. He does not come from entrepreneurial parents, and though his mind runs constantly on improvement, "I can't walk into a convenience store without thinking about like gee they'd probably sell more chips if they moved them from here to there," he is not "a kind of core idea guy" like his co-founder Ben Sun, who "has more good new startup ideas in every shower he takes that I have in a month" [1]. The proof is that when college friends starting what became Tripod offered him employee number one in 1995, he "really didn't even consider it seriously for a nanosecond" because he was on a predictable, well-paid consulting path, which he now calls "a really bad idea" and evidence of how he was wired [1].

What pulled him out of strategy consulting was distance from the action. The problem-solving at Merck and Coca-Cola was intellectually engaging, but the companies were "so big and slow as as they should be given the nature of their scale" and "just always so far removed from where the rubber was really meeting the road" [1]. Venture offered the same variety of running two or three engagements at once, but with an entirely different velocity: with a five, fifteen or fifty person company "you literally can walk into a conference room have a meeting with a group of people and walk out of the room and the business fundamentally changed direction" [1]. He remembers leaving his first substantive portfolio company meeting knowing the company would operate differently the next day, something that "just never had happened in a coca-cola" [4]. Crucially, being the person with the idea was never the appeal: "being around that degree of dynamism and change and excitement was that's what got me excited" [1]. He tested the operating alternative directly, running one portfolio company day to day for a year during the financial crisis, and concluded he has "too much add and too much hunger for variety to be all in on that" [4]. He is also wry about the identity, usually telling strangers he has "a small finance business" because being a venture capitalist "is something that comes with a lot of baggage and assumptions" [1].

On when to start something

His advice to would-be founders splits on whether the idea already exists. "If you have an idea that keeps you up at night that you can't imagine not pursuing then that's the answer to when should I do this" [1]. Inexperience is not disqualifying: "everything that you lack in experience and maturity and whatever that can all be solved for and hired for," and the Zuckerberg, Gates and Dell examples show you do not need a long career first [1]. What cannot be substituted is conviction, since "there is nothing more important than the purity of the passion and conviction that comes with" the person who had the idea [1].

For the much larger group who know only that they want to be an entrepreneur, he prescribes real-world experience first, and warns specifically against the whiteboard route, "I'm going to find a buddy and we're going to sit by a white board and keep throwing stuff up there until we come up with something good" [1]. Those businesses lack authenticity, which matters twice over: it sustains you through "what is going to be a gut-wrenchingly miserable experience at many many many moments," and it determines your credibility in the market, because a made-up idea you have no experience behind "is going to come through to customers and they're not going to get as excited about you" [1].

Takeaways

• Capital is a commodity, so a seed firm's real product is everything attached to the check: "all money is green and what else do you do" [1].
• Restricting Primary to New York is what makes its operating support possible, from reaching any portfolio company in twenty minutes to attempting a database of the top ten percent of tech talent in the city [1][2].
• Choose a side of the barbell, high-touch operational support or high-volume check writing; firms in the middle are JCPenney [2].
• At three employees and pre-product, the market and the product are unknowable, so back the founder's ability to reassess and pivot, "be that a you know five degree pivot or a 90 degree pivot or a 180 degree reversal" [2].
• The three unnatural sales are employees, investors and customers, and the customer version means "you're selling a solution to a human being with a job" [3].
• Fund math sets the market threshold: with a $155 million fund, every check must plausibly return half the fund, which implies two billion dollar markets and success on single-digit share [2].
• Losing all the money in a quarter to a third of investments is normal and compatible with top-tier returns [2][3].
• Cash is king, burn must be controllable, and capital should be raised early enough never to raise from distress [4].
• A thesis fails if the geography it assumes is not actually one market; upstate New York "wasn't a market it was a collection of little ones" [4].
• Start now if the idea keeps you up at night; otherwise go get real-world experience rather than brainstorming at a whiteboard [1].