20VC Exclusive: Mercury Founder Launches First $26M Fund | Why Founders Should Take the Highest Price | Why Serial Entrepreneurs are Better | Why AI Is So Overhyped | The Future of Venture Capital with Immad Akhund

The conversation between host Harry Stebbings and Immad Akhund, CEO of Mercury, opens with reflections on entrepreneurial mindset and challenges. There's an acknowledgment of the temptation entrepreneurs face in chasing high valuations, even when they might not be rational.

They also discuss preferences for certain founder profiles, suggesting that experience can be a valuable asset.

Timestamp: [00:00-00:36]

In conversation with Harry Stebbings, Immad Akhund shares exclusive news about his first institutional fund, marking a significant milestone in his investment career after years of angel investing.

Immad provides context about his investment background, revealing the extensive experience that led to this new venture.

He explains the transition from his previous investment structure to the new fund, which is already active.

Timestamp: [00:54-01:49]

When Harry Stebbings asks about his biggest lessons from 350 angel investments, Immad Akhund shares critical insights from his extensive experience, highlighting the importance of ego management and the entrepreneur-investor relationship.

One key lesson revolves around the temptation investors face to impose their own ideas on founders, especially when transitioning from operator to investor.

Immad emphasizes the need for investors to step back and respect the founder's vision.

He reflects on his own evolution as an investor after selling his previous company.

Timestamp: [01:49-03:07]

Continuing his conversation with Harry Stebbings, Immad Akhund shares a compelling story about one of his early investments that completely changed his perspective on what makes a successful investment relationship.

This experience prompted a profound realization about the nature of successful investments and the role of investors.

This case study illustrates the counterintuitive truth that sometimes the most successful investments require the least investor involvement.

Timestamp: [03:07-03:43]

The conversation between Harry Stebbings and Immad Akhund explores the nuanced dynamics of founder-investor interactions, specifically around how founders respond to investor feedback.

Stebbings suggests that founders who too readily accept an investor's ideas might be displaying a red flag:

Immad acknowledges this perspective but adds an important dimension about founder experience and confidence:

He reflects on how this standard can unfairly disadvantage first-time founders:

Immad advocates for a more nuanced approach that considers the founder's background:

Timestamp: [03:43-05:03]

The conversation turns to a provocative idea about the relationship between top founders and their investors.

Harry Stebbings references a perspective from Keith Rabois:

Immad largely agrees while providing nuance about the selective value an investor can provide:

He explains that even successful founders occasionally need specific expertise:

Immad describes his philosophy as an investor:

Timestamp: [05:03-06:04]

In his conversation with Harry Stebbings, Immad Akhund offers a candid assessment of the value proposition from venture capital firms, cutting through the marketing to highlight what truly matters.

On the claimed value-adds from VC platforms:

He identifies the two factors that actually provide significant value to founders:

On the second key value:

Timestamp: [06:04-07:24]

• Founders should be cautious about chasing irrational valuations, though it may be tempting and sometimes necessary in hot markets
• Successful angel investing requires checking your ego and not imposing your vision on founders
• Sometimes the most successful investments are ones where founders rarely contact their investors
• Investor pushback reactions should be evaluated contextually - experienced founders may push back strongly, while first-time founders might be more receptive
• The best founders generally don't need their investors, but selectively tap their expertise for specific challenges
• The most valuable aspects of VC relationships are the individual partner relationship and access to the founder network
• VC platform "value-adds" like BD and hiring teams are often not as valuable as claimed and may just justify management fees

Timestamp: [00:00-07:24]

Harry Stebbings asks Immad Akhund about the impact of getting Sequoia as an investor and whether it was a needle-moving event for Mercury.

Immad reveals the persistent effort it took to finally land Sequoia as an investor:

When discussing Sequoia's approach to the investment, Immad expresses admiration for their thoroughness:

He appreciates this level of diligence rather than having investors make decisions based on FOMO:

Timestamp: [07:29-09:02]

Harry Stebbings asks Immad for his advice to founders on valuation, leading to some contrarian perspectives on fundraising strategy.

Immad reveals the substantial amount they raised in that round:

He emphasizes that the real mistake isn't taking high valuations, but rather not raising enough money at those valuations:

His second key insight concerns spending discipline:

This leads to a discussion with Harry about young founders' tendency to spend aggressively once they have capital:

Immad acknowledges the challenge most founders face:

Timestamp: [10:12-12:52]

When Harry asks about Immad's biggest win as an angel investor, he shares the success story of TrueBill and the lessons he drew from it.

When pressed on the details of his investment:

This resulted in an impressive return:

Immad extracts two critical lessons from this success:

He cites another example from his portfolio:

The second lesson concerns market timing:

Timestamp: [12:52-14:46]

Harry asks whether Immad prefers founders with deep industry experience or those bringing fresh perspectives to a market, leading to insights about the value of naivety.

Immad reveals the challenges this lack of experience created when fundraising:

He highlights the irony of the situation:

His conclusion emphasizes the value of fresh perspectives:

Timestamp: [16:08-17:34]

Harry asks Immad to reflect on his biggest investing miss and how it shaped his approach, revealing a significant lesson about age bias.

Immad shares his flawed reasoning at the time:

This experience helped him recognize a unique advantage that youth can bring:

Timestamp: [17:34-18:20]

Harry asks Immad for one piece of advice he would give to founders who want to start angel investing, leading to insights about portfolio strategy and capital requirements.

Immad emphasizes the importance of having enough capital for a diversified approach:

He explains the rationale for this portfolio size:

Immad frames the fundamental nature of early-stage investing:

When Harry asks if the age of chasing unicorns is over, Immad explains the changing economics:

Timestamp: [18:20-19:59]

• Getting investment from top-tier firms like Sequoia often requires persistent effort and multiple pitches
• The most prestigious VC firms often do the most thorough due diligence before investing
• Taking high valuations isn't necessarily a mistake, but failing to raise enough money at those valuations can be
• The key to sustainable growth at high valuations is raising substantial capital but maintaining spending discipline
• Repeat founders often excel at conquering difficult, competitive spaces through their prior experience
• Market timing is crucial - TrueBill's exit at 1.25B in December 2021 represented perfect timing
• Serial founders with "a chip on their shoulder" make particularly compelling investment opportunities
• Industry outsiders can bring valuable fresh perspectives that industry experts might miss
• Underestimating young founders can lead to missing generational opportunities like Scale AI
• Angel investing requires sufficient capital for a diversified portfolio (20-30 investments minimum)
• At current valuations, even unicorn outcomes may not provide sufficient returns for early investors

Timestamp: [07:29-19:59]

Harry Stebbings and Immad Akhund continue their conversation about angel investing returns and the changing landscape of startup valuations.

When Harry asks for any other lessons from angel investing before moving to discuss Immad's new fund, Immad shares insights about how deal flow evolves over time:

He reflects on how his position has changed:

When Harry asks how much of his current deal flow comes from being a successful founder versus being an active angel, Immad emphasizes that success as an angel can come independently:

Timestamp: [20:04-21:40]

Harry asks Immad about his approach to secondary sales and taking money off the table from his angel investments.

Despite this opportunity, Immad shares his general philosophy about staying invested for the long term:

When Harry challenges him on Airtable's potential to become a $50 billion company, Immad defends his optimistic outlook:

He adds a pragmatic perspective on the valuation:

Harry references Bill Gurley's principle of the 10x revenue multiple:

Immad remains optimistic about companies' ability to scale rapidly:

Timestamp: [21:40-23:36]

Harry poses a provocative question about whether revenue means less than ever before given its potentially transient nature and lower quality, sparking Immad's analysis of different types of revenue in the current market.

Immad explains why this type of revenue is particularly vulnerable:

He details how competitive dynamics will inevitably compress margins:

Immad predicts the extent of this compression:

He contrasts this with more sustainable SaaS revenue models:

Timestamp: [23:36-26:00]

Harry asks a pointed question about whether defensibility still exists in today's market, noting how quickly users might switch between tools like Cursor and WindSurf. This leads Immad to share his perspective on how moats will evolve in the AI landscape.

Despite the current volatility, Immad believes traditional forms of defensibility will eventually return:

He explains how market leaders will establish durable advantages:

Immad puts the current market chaos in perspective:

When asked which AI coding tools his team uses internally, Immad responds:

Timestamp: [26:00-27:30]

Harry references productivity gains from AI coding tools, mentioning that HubSpot and Salesforce have reported significant portions of their code now being AI-generated. He then asks a provocative question about the future of engineering teams:

Immad offers a somewhat contrarian perspective on this question:

This perspective suggests that AI will expand possibilities rather than simply reduce headcount, as companies leverage increased productivity to tackle more ambitious goals.

Timestamp: [27:30-28:14]

Harry asks Immad to reflect on something Mercury strategically didn't do that, with hindsight, they should have pursued. This leads to a candid discussion about product launch timing.

Immad explains how the competitive landscape shifted unexpectedly:

He reflects on the missed opportunity:

Despite the delay, Mercury eventually corrected course:

When Harry asks specifically if Mercury's credit card is now bigger than Brex's credit card for Mercury customers, Immad confirms their strong position:

Timestamp: [28:14-29:58]

• Angel investors should aim for decacorn outcomes ($10B+ companies) rather than just unicorns to achieve significant returns
• Deal flow naturally becomes easier over time for active angel investors, even without being a successful founder first
• Secondary sales can be beneficial, but many angel investors prefer to stay invested in potential "compounders" for 10-15 years
• AI's impact on revenue models creates two tiers: easily commoditized "labor replacement" revenue versus stickier SaaS revenue
• Competitive dynamics will compress margins dramatically for AI products that simply replace labor costs
• Despite current market volatility, traditional forms of defensibility (brand strength, product expansion, enterprise relationships) will return to the AI space
• AI productivity gains may lead to more engineering hires rather than fewer, as companies pursue more ambitious goals
• Timing of product launches and competitive reactions is critical - Mercury's delay in launching credit cards gave competitors a 2-year advantage
• Ownership of the primary financial relationship (banking) can create powerful advantages for cross-selling additional products

Timestamp: [20:04-29:58]

Harry Stebbings asks Immad Akhund how he thinks about competition in the crowded fintech space, where Mercury competes with well-funded players like Brex and Ramp.

Immad reveals his philosophy about focusing on customers rather than competitors:

He's adamant about not letting competition drive product decisions at Mercury:

When Harry brings up the concept of "counterpositioning" — how Ramp positioned itself as the opposite of Brex with "save more" versus "spend more and get points" — Immad explains his different approach:

He provides context about Mercury's scale:

When Harry asks why competitors might have higher valuations despite Mercury's scale advantage, Immad offers a pragmatic response:

Timestamp: [30:03-32:56]

Harry pivots the conversation to ask Immad about his decision to transition from angel investing to launching a fund, despite his successful track record of 350 angel investments.

Immad describes how his increasing visibility through Mercury created both opportunities and challenges:

He shares a candid assessment of his capacity constraints:

Timestamp: [32:56-34:04]

Harry asks Immad to explain the thinking behind raising $26 million for his fund, which leads to insights about the fund's investment strategy.

Immad explains why this approach makes sense given his position:

He highlights the benefit of his complementary role to larger VCs:

Immad details the fund's check size strategy:

When Harry calculates that the initial checks would total about $9 million (60 × $150K), Immad clarifies there will be some variation:

Timestamp: [34:04-35:33]

The conversation turns to follow-on investments, with Harry and Immad debating the merits of different approaches to reserve capital.

When Immad mentions using reserves, Harry offers candid advice:

Immad pushes back, expressing his concerns about SPVs:

Harry counters with a founder perspective:

Immad explains his reservations about typical SPV dynamics:

This leads to a debate about whether early indicators of success are reliable. Harry shares his contrasting experience:

Immad counters with examples from his own portfolio where early signals were clear:

He concludes with a balanced view:

Timestamp: [35:33-38:26]

As the conversation continues, Harry asks Immad about pricing sensitivity for his investments. While Immad indicates he's generally a "price taker" as a non-lead investor, he reveals an important exception - AI startups.

When Harry asks him to elaborate on why AI is overhyped at the seed stage, Immad offers a candid assessment:

Despite his skepticism, Immad acknowledges he's still selectively investing in the space:

He explains his broader investment philosophy about avoiding oversaturated markets:

When Harry asks what differentiated the AI companies Immad did invest in, he begins to answer:

Timestamp: [38:26-39:59]

• Successful companies focus on customers and building great products rather than obsessing over competitors
• Mercury differentiates through targeting companies "at inception" rather than competing directly with Brex and Ramp
• Market perception can lead to valuation differences – enterprise SaaS and payments are better understood by investors than banking models
• As Mercury grew to serve 30-40% of startups, the increased deal flow made it impossible to evaluate all opportunities as a solo angel investor
• The $26M fund is structured for diversification with 60 companies and primarily non-lead checks averaging $150K
• There's a philosophical difference between using fund reserves versus SPVs for follow-on investments
• Investors debate whether success signals are visible within 6 months or require longer observation, with enterprise companies potentially being "slower burns"
• AI startups at seed stage face heightened scrutiny due to excessive hype, similar valuations, and repeated business models
• Less competitive sectors like space tech and hard tech may offer better opportunities for seed investors than saturated AI markets
• The most successful seed investors focus on areas outside the current "hype cycle" while being highly selective within trendy sectors

Timestamp: [30:03-39:59]

Continuing their discussion about AI investments, Immad Akhund shares with Harry Stebbings the specific criteria he uses to filter AI opportunities in an oversaturated market.

Immad provides an example of the type of AI investment he finds compelling:

He outlines the second category of AI companies he's willing to back:

Immad contrasts these rare exceptions with the majority of AI pitches he sees:

He notes a significant change in the competitive landscape:

Timestamp: [40:05-41:19]

Harry Stebbings humorously notes that Immad seems to be "literally having to go to another planet to find the deal" and admits he knows little about space tech. He asks Immad to share his approach to investing in unfamiliar sectors.

Immad explains how initial investments create learning opportunities:

He demystifies space technology for Harry:

Immad outlines the current market structure:

When Harry asks if space tech rounds are "mega" sized, Immad explains the investment dynamics:

He contrasts space tech with biotech investing:

Timestamp: [41:19-44:03]

Harry raises a practical question about how Immad, who already runs Mercury, will manage time for his new portfolio with 60 companies.

Immad shares a surprising observation about founder behavior:

He reveals his typical engagement level:

Immad then offers a thoughtful perspective on the nature of time management:

Timestamp: [44:03-45:05]

Harry presents Immad with a framework of VC skills: sourcing, selecting, securing (winning), and servicing, asking which he feels are his strongest and weakest areas.

Immad shares examples of his deal access:

He identifies what he finds most enjoyable about investing:

Immad provides a specific example:

Timestamp: [45:05-46:23]

Harry shifts the conversation to Immad's fundraising process for his $26 million fund, asking how it went.

When Harry jokingly asks if Immad just "WhatsApp'd a load of mates," Immad explains his approach:

Harry asks if Immad secured Sender as an investor, which Immad confirms:

Immad describes the most challenging part of the process:

When asked about the timeframe for the fundraise:

Harry inquires about the largest investment:

When asked about the biggest surprise of fundraising for a fund, Immad offers a candid assessment:

Regarding the composition of his limited partners:

Timestamp: [46:23-48:55]

Harry raises a provocative question about the potential conflict of interest when founders also manage investment funds.

Harry clarifies his perspective:

He distinguishes between personal angel investing and fund management:

Immad begins to respond to this ethical challenge:

Timestamp: [48:55-49:53]

• Successful AI investments require either second-time founders with deep domain expertise applying AI to a specific problem, or startups showing undeniable traction
• The competitive landscape has intensified dramatically in recent years, with sectors going from 2-3 competitors to 15+ all raising substantial capital
• Space tech investing focuses on three primary markets: rockets, earth observation ($40B market), and communication
• Space technology isn't necessarily more difficult to understand than other sectors, and can offer better seed-stage investment opportunities than oversaturated sectors
• Time management is more about energy management - activities that energize you (like founder discussions) consume less "real" time
• Small check sizes ($150K) provide significant advantages in deal access, even getting into rounds that are technically "closed"
• The most fulfilling aspect of investing is the learning that comes from founders working at the cutting edge of technology
• Fund fundraising is surprisingly procedural and repetitive compared to startup fundraising, with less intellectual stimulation
• The fundraising process for a $26M fund with established track record can be completed in about 3 weeks, though legal documentation takes much longer
• There are legitimate ethical questions about founders dividing their attention between company-building and fund management

Timestamp: [40:05-49:53]

Continuing their conversation about potential conflicts between running a company and managing a fund, Immad Akhund explains to Harry Stebbings how the two roles have been complementary throughout his career.

Immad reveals how his investing directly benefited Mercury's early growth:

He describes how he addressed this with his team:

Immad explains the symbiotic relationship between his roles:

Timestamp: [50:00-51:12]

Harry poses another provocative question to Immad about his decision to raise external capital:

Immad's response reveals his broader ambitions beyond financial returns:

When Harry asks what he wants it to be, Immad is candid about his exploratory approach:

He outlines potential future directions:

Timestamp: [51:12-52:41]

Harry shares his perspective on the challenges of seed investing given the competitive landscape:

Immad offers a nuanced response, highlighting how his approach differs from lead investors:

He puts the competitive dynamics in perspective:

Immad explains the typical profile multi-stage funds target:

He identifies the opportunity for specialized seed funds:

Timestamp: [52:41-53:58]

Harry asks Immad how he expects venture capital to change in the next 5-10 years, prompting insights about industry evolution.

Immad predicts increased capital flowing into the asset class:

He explains the structural drivers:

Immad offers a nuanced view on how different segments of the VC market will fare:

Harry adds: "I think you do suffer because you pay higher prices."

Immad acknowledges: "That's true, that definitely impacts your returns with the multi-stage seed product."

Timestamp: [53:58-55:16]

Harry references Stripe's founders (the Collisons) who have publicly questioned the need to go public, asking Immad for his perspective on why companies might delay IPOs.

Immad identifies two structural issues in public markets that discourage early IPOs:

He elaborates on the size threshold:

Timestamp: [55:16-57:01]

Harry inquires about Immad's approach to secondary sales for Mercury employees:

Immad shares his company's experience:

When Harry asks if he's comfortable with this practice, noting that "Nick at Revolut is incredibly tight on secondaries," Immad offers a thoughtful perspective:

He explains his philosophy about equity as compensation:

Timestamp: [57:01-58:13]

As the conversation begins to wind down, Harry asks Immad about investors whose deal flow he particularly values:

Immad identifies several valued sources:

He mentions another fund he values:

Immad adds other respected sources:

He offers an interesting insight about fund thesis:

Timestamp: [58:13-59:30]

• Investing and company-building can have a symbiotic relationship, especially when the company serves startups (as Mercury does)
• Building an institution extends beyond financial returns and allows scaling of one's impact on entrepreneurs
• Multi-stage funds have changed seed investing dynamics but still focus on specific founder profiles, leaving opportunities for specialists
• The VC industry is evolving toward a "barbell" structure with large multi-stage firms at one end and specialized small check writers at the other
• The venture capital industry is likely to see more institutionalization, with top firms potentially going public
• Companies delay IPOs due to regulatory burden and limited analyst coverage for companies below $10B valuation
• Secondary sales can provide valuable liquidity for employees and early investors, making equity more meaningful as compensation
• For co-investment opportunities, investors who have specialized knowledge in specific sectors often provide the highest quality deal flow
• Thesis-driven funds may have advantages in sourcing quality deals within their focus areas, even if broader investment strategies work better generally

Timestamp: [50:00-59:30]

As Harry Stebbings transitions to quick-fire questions, he asks Immad Akhund what he's changed his mind on most in the last 12 months.

This shift in perspective reflects Immad's evolving view on AI's trajectory:

When Harry asks about his favorite AI tool, Immad shares a practical example:

Timestamp: [59:35-1:00:32]

Harry asks Immad what he knows now that he wishes he'd known when he started, prompting insights about early culture-building.

Immad emphasizes the importance of meaningful values:

He shares an example of how these values impact decisions:

The long-term impact of this early commitment has been significant:

Timestamp: [1:00:32-1:01:35]

After previously discussing what Mercury didn't do that he wishes they had (launching credit cards earlier), Harry asks Immad what they did that he wishes they hadn't done.

Immad explains his cautious reasoning at the time:

With the benefit of hindsight, his perspective has shifted:

When Harry asks if he would have preferred to raise $3 million on a $23 million valuation, Immad is precise:

Timestamp: [1:01:35-1:02:37]

For his final question, Harry asks Immad to paint the bull case for Mercury becoming a hundred-billion-dollar company.

Immad articulates his vision for how these markets will converge:

He predicts a future where this integration becomes standard:

This massive addressable market shapes Immad's perspective on competition:

Timestamp: [1:02:37-1:04:00]

Harry wraps up the conversation by expressing his enthusiasm for Immad's new fund and their potential collaboration.

Immad responds warmly:

Timestamp: [1:04:00-1:04:18]

• Immad has become less skeptical about advanced superintelligence timelines due to the relentless pace of AI advancement
• ChatGPT has become an integral productivity tool for Immad, even helping him create presentations efficiently
• Defining company culture when there are only 3-4 people is crucial and much more difficult to establish later
• Cultural values must involve real trade-offs (like prioritizing humility) to be meaningful and guide decisions
• Raising too much money at the seed stage ($6M on $23M valuation) created unnecessarily high dilution
• In hindsight, $3.5M would have been the optimal amount to reach Series A with a buffer
• Mercury's $100B opportunity comes from the convergence of two massive markets: banking ($2T) and financial software ($500B)
• The separation between banking and financial software exists primarily because traditional banks struggle with software development
• The size of the financial market opportunity makes it seem relatively uncompetitive compared to sectors like B2B SaaS
• Mercury's vision includes not just the US market but global expansion and consumer financial services

Timestamp: [59:35-1:04:18]