20VC: Max Altman on The New Seed War: Can Anyone Compete with Sequoia and a16z | Leaving $2BN on the Table with Reddit | Lessons from Backing Rippling at $25M Post | Why Climate Tech is a Mirage and Disaster
Timestamps are as accurate as they can be but may be slightly off. We encourage you to listen to the full context.
Podcast Summary
In this candid conversation, Max Altman, co-founder and managing partner at Saga Ventures ($125M early-stage fund), shares his journey from Midwest roots to becoming a prominent venture investor. (03:55) The discussion covers his time at Zenefits working directly under Parker Conrad, his investment successes including Rippling at a $25M valuation and Reddit at $600M, and the lessons learned from managing $200M funds (Hydrazine and Apollo) alongside family members Sam and Jack Altman. Max candidly discusses the challenges of investing in his brother Sam's shadow, his decision to build Saga independently, and his contrarian views on climate tech and venture capital's current state.
- Main themes: Building venture capital firms independently, the evolution of seed investing, family dynamics in business, and contrarian investment strategies in AI and climate tech.
Speakers
Max Altman
Max Altman is Co-Founder & Managing Partner at Saga Ventures, a $125M early-stage fund. Before Saga, Max was an investor with Apollo Projects, Hydrazine Capital, and Altman Capital, where he helped deploy over $500M into breakout names such as Rippling and Reddit. He previously served as the first product manager at Zenefits, working directly under Parker Conrad, and started his career as a quantitative trader in Chicago after growing up in St. Louis.
Harry Stebbings
Harry Stebbings is the host of 20VC, one of the world's leading venture capital and startup podcasts. He has interviewed thousands of the world's leading venture capitalists and entrepreneurs, building one of the most influential platforms in the startup ecosystem.
Key Takeaways
Focus on Winning Over Culture
Max learned from his Zenefits experience that "sales and growth cure everything" and that winning should be the primary focus for startups. (08:18) He argues that when companies are winning, culture naturally follows because personal development and financial success create happiness. This contrasts with the trend of companies focusing heavily on mission and culture without prioritizing growth. The key insight is that sustainable cultures are built on the foundation of business success, not the other way around.
Price Sensitivity Versus Quality in Early-Stage Investing
Max emphasizes the importance of backing exceptional founders regardless of valuation, sharing how he invested in Rippling at what seemed like an expensive $25M pre-money valuation in 2016. (17:22) His biggest learning was that it's better to own 3% of an amazing founder than 15% of a company that will be worth zero. This principle extends to his current strategy where he'd rather participate in transformational companies at higher valuations than miss opportunities due to price sensitivity.
The Power of Network-Driven Deal Flow
The best investment opportunities come from founder-to-founder referrals rather than other VCs, according to Max. (32:36) He explains that when VCs send deals, it's usually because they don't want them themselves, whereas founders referring their friends typically identify genuine opportunities. Specifically, he's found CTOs to be excellent sources of technical referrals. This insight highlights the importance of building deep relationships with portfolio company technical leadership.
Strategic Portfolio Construction for Seed Funds
Max advocates for a concentrated approach over the spray-and-pray method, structuring Saga with 20-25 lead positions and 30% reserves. (35:36) He learned from previous funds that they needed only one major winner if they could maintain 7-10% ownership through exit. This approach allows for deeper founder relationships and more focused support, contrasting with index-style funds that make smaller bets across hundreds of companies.
Avoiding OpenAI's Sphere of Influence
Max has developed a framework for AI investing that focuses on "second-order effect" companies that are unlikely to be disrupted by OpenAI's expansion. (55:55) He visualizes what OpenAI will look like as a $3 trillion company and invests in areas they won't want to touch, such as supply chain logistics for trucking. This strategy acknowledges that OpenAI will likely expand into adjacent areas but avoids direct competition in core AI infrastructure.
Statistics & Facts
- Max invested in Rippling at a $25M pre-money valuation in 2016 with a $1.35M check, giving him approximately 5% ownership in what is now a $20B+ company. (14:53)
- The Hydrazine fund had approximately 17 unicorns across their portfolio, demonstrating exceptional hit rate for early-stage investing. (12:35)
- Reddit was valued at approximately $39B at the time of recording, compared to Max's entry at $600M, representing a roughly 65x return on the investment. (22:03)
