Friends, 

There are many ways to win at the game of venture capital. 

You can invest early and often, building an index of promising bets. You can back companies late and move deliberately, minimizing risk. You can double and triple down into your winners or deploy all of your capital upfront. You can use your management fees to build an expansive team or stay out of the way as much as possible. You can specialize in a sector or play the generalist. You can narrow in on a geography – a continent, a country, a state, a city – or scour the globe. You can focus on the founder above all else or ignore the founder and care only about the market. You can look for the most crowded room and try to elbow your way to the front or parse through lonely, abandoned ones in search of hidden gold. You can mix and match these variables to your heart’s content, and though the ingredients remain static, you can create something entirely new. 

With Primary Venture Partners, Ben Sun has turned the dials, fiddled with the formulas, and created something distinctive. The New York-based firm takes inspiration from other players – not least Andreessen Horowitz with its wholehearted embrace of a services model – but still has its own flavor. Despite scaling its assets under management, Primary remains focused on New York seed, invests quite selectively, keeps little capital in reserve, and invests much of its management fees into its uncommonly large “impact” team. 

Though less than a decade into its life, a blink of an eye in venture terms, Primary looks to be on to a winning strategy: its first fund reportedly is tracking at an 11x return, with its second at 5x. Critically, Sun shared that it has distributed 2.5x in returns on its Fund 1 to LPs. Its raise for Fund 4 brought Primary’s assets under management to north of $1 billion. 

Ben’s work at Primary and prior investments as an angel have established him as one of the best pickers in the industry. Over his twelve years in venture investing, Ben has made 40 seed investments, 8 of which have reached unicorn status. That 20% hit rate is impressive, as is the collection of investments, which includes Noom, K Health, Jet, and Coupang, where he still serves on the board. That track record has earned Ben multiple mentions on the Midas List.

Just as interesting as Ben’s record is the operational mindset with which he approaches the venture asset class. As a former founder, he has sought to build a firm that runs like a startup, driven by clear KPIs and strategic initiatives. 

In today’s interview, we dig into this strategy, Ben’s investing filter, and why Primary’s model makes sense despite market skepticism around the value of “platform” teams. 

P.S. As a note, this is part of our “Capital” series profiling excellent investors and delving into the details of their approaches. Especially since this is a new series we’ve launched, I would love to hear what you think of it!

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Primary’s strategy 

To start: what is Primary’s reason for existing? 

We have this saying at Primary: “Startups are hard, founders deserve better.” That mantra is very much our genesis and why my partner Brad (Svrluga) and I came together to found the firm in 2015.

My experiences as a founder informed that saying. I started a company in the 1990s, raised about $20 million in venture money, went on this 12-year journey, and eventually reached an exit. It was a good but modest outcome. After it was over, I looked back on it all and asked myself, “Beyond the capital, were my investors really that helpful?” Unfortunately, the answer was, “Not really.” 

None of them were hands-on. I didn’t want them running my company, but I did want them to have more context and be more aligned. I always felt misaligned with them. When I spoke to my founder friends – this was in the 1990s, early 2000s – that was a pretty common story. There wasn’t much value beyond a check in a lot of cases. 

I came to this space with the premise: “Shouldn’t venture be done differently? Shouldn’t investors actually try to help?” As an operator, I felt like the devil was in the details. The more you understand the details, the more you can help. That was our core purpose in starting Primary. 

Historically, Primary focused on startups in New York City, but it seems like the mandate has expanded in recent years. What’s behind that evolution?

The first thing to say is that New York is an amazing market. The reason we started here is that, back in 2015, it was pretty underserved. Because of that, we felt we could win market and mindshare quickly. We could build a brand. 

By focusing our resources, time, and networks, we were able to be much more impactful. I tell people, “I’d rather cherry-pick the best opportunities locally than be mediocre globally.” All the networks you have and events you throw compound on each other. If you meet a great software engineer in the city, even if they’re not a fit for one portfolio company, they might be for a dozen others. If you pick the right market, focusing your resources locally can create incredible competitive advantages. You can better see, win, and help the founders in your market. 

Since we started, the New York ecosystem has developed even better than I imagined. In 2010, 96 seed deals were done in the city. In 2022, there were almost 900 – a 10x increase. Sometimes people ask me, “Are you constrained on New York?” No, we’re not.

Over time, we’ve become more open to investing outside the city. When we were getting started, if a deal came to us from the Bay Area, we automatically said, “What’s wrong with it?” It was like, “There are 2,000 seed investors over there. Why is this getting to us?” Over the last 18 months, we’ve done 2-3 San Francisco deals. The difference is that they came from founder referrals. We’ve also invested in companies in London, Israel – it’s starting to grow. It’s a benefit of Primary’s expanding brand and expanding network. 

At the same time, New York, our initial beachhead, continues to have incredible talent. 

Given the rise of New York as a market, simply being a geographically specialized player isn’t a sufficient differentiator. What would you say is Primary’s edge? What are your distinctive advantages? 

Our primary advantage – no pun intended – is scale. 

We can go through the things VCs talk about. It’s like, “Oh, we’re investors.” Great, everyone’s an investor. “Oh, we offer operational support.” Every firm says they have a community person or a platform person. “We do events.” Cool, we do events, they do events. 

But let’s go through them. We have 13 people on our investment team, just doing seed – a different scale. And now, each of those investors has specializations. They get really deep in their industries and sectors. They build networks, mental models, and points of view around those sectors to be a better partner to founders. 

OK, let’s talk about operational support – some people call it “platform team,” we call it an “impact team.” A lot of small funds hire one person, maybe do a couple of events, maybe handle a couple of intros. We have over 20 people, starting with C-Suite level executives: Lisa Lewin was the CEO of General Assembly, Cassie Young was Chief Commercial Officer at a $200 million SaaS company, Rebecca Price was Chief People Officer at Capsule at Enigma. Then, they have teams of operators underneath them helping with talent recruiting, go-to-market, and strategic finance. That’s really different. That’s the difference of, “Wow, scale.”

Then, take the last example of marketing or events. Yeah, you can do an event. A lot of funds say, “Hey, we’re going to host a 15-person dinner,” and there are probably 20 of them every night in the city. We host things like the New York City Summit: 2,000 people, invite-only. It’s become the go-to startup ecosystem event in the city. If we’re going to do an event, we tell ourselves, “Let’s go big, let’s own the tent poles of the market and build brand.”

When you build up scale, you can see better stuff, win better deals, support your companies, and build brand and marketing. That’s what we’ve locked into.

As you said, many funds have a “platform” team, but the extent to which Primary has invested in it is unusual. Beyond Andreessen Horowitz, I’m not sure many others consider it such an important part of their DNA. Why do you believe in this model?

For context, we have almost 50 full-time people. That’s as a seed fund with $1 billion under management. I was talking to Tony Florence at NEA – they manage $30 billion and have 120 people. He was like, “Wow, you have 50 people!” So, it’s a crazy ratio as a seed firm. 

We arrived at this model based on my journey as a founder, being frustrated and saying, “How come it’s not done differently?” When Andreessen started to do it, I thought, “Oh, this is about to change.” But in their early days, there were a lot of skeptics, if you remember. Everyone was saying a16z’s funds were not performing – and then suddenly, those early funds were great.

The norms started to change thanks to what they were doing and what people like Josh Kopelman at First Round were doing. You started seeing folks do it both early stage and multi-stage. The first ones that try out a new strategy have to endure a lot of pain – we were the next ones up. 

Still, people scratched their heads, wondering, “Should you guys really be doing this? Does this really work?” But we always had full conviction. I think the market will continue to go that way, as evidenced by our ascension as a brand and performance so far. People are now pointing to us and saying, “Look at those guys, that kind of works.” People will push us to improve, too, which is better for the overall market. If you think about it, if your capital suddenly comes in with more support, the whole ecosystem will get better. It only helps the ecosystem and asset class as a whole. 

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In your discussion about Primary’s edge, you mentioned that you run a specialized investment team, with each investor focusing on a specific sector. That’s a recent change in your model. Do you worry that by specializing the team, you’ll miss out on category-defying players?

There are two elements to that question. The first is that when you have multiple check writers in specific lanes, and a deal comes up between a couple of them, you might have people saying, “This should be my deal versus your deal.” That happens if your carry is based on your individual deals – like, “I’m going to jump all over this opportunity because I get more economics.” Ultimately, if there are misaligned incentives, you can have conflict. 

I experienced that as CEO – at my startup, there were periods when there was a lot of infighting and politics. And I was the CEO! So I had to deal with it. Because of that, before Brad and I started Primary, we got together and said, “Let’s establish our core values.” I had seen just how much misaligned incentives could hurt an organization. 

One of the core values we decided on was “One team.” Everyone at the firm has economics in our funds. People don’t get different economics based on the success of the company that they work on, or whatever. This creates an atmosphere of, “Hey, let’s do what’s right for the company and the firm.” 

The second part of the question is, “What happens when an opportunity comes up that doesn’t fit any of the lanes you’ve categorized?” Part of an investor’s job is to go deep into a sector because when you meet founders playing in that space, they demand that. But you also want to be open-minded to industries you don’t cover where you’re just meeting great talent and learning about something you weren’t deep on. 

I remember when we invested in Chief, a private network for women executives. It didn’t fit a clear lane, so many investors were like, “What is this thing?” It was a harder seed round to put together – we were basically co-leading. And then suddenly it launches and gets to $3 million of ARR in three months, and everybody and their mother says, “Oh yeah, this makes total sense!” Then, they had a dozen term sheets. It amazes you how quickly that switches with traction. 

Coupang was another example. It’s funny because everyone sees me as an Asian-American, and because I invested in that company, people inherently think I’m Korean. I always shock people, like, “I’m actually not Korean!” I met the founder Bom, and although I knew about the Groupon model and e-commerce, he was the one who enlightened me on the Korean market and why what he was doing would work so well there. 

At the time, almost all global VCs didn’t know the Korean market – if they were focused on Asia, it was China and India. Bom had to educate not only me but a lot of other people along that journey. Those investors who were open to hearing it found a great opportunity, one they didn’t have a thesis on. You have to straddle both: be willing to go deep but remain open. 

I’m a believer in the saying, “Your size is your strategy.” Primary’s latest raise was $425 million, split between a $275 million early-stage fund and a $150 million follow-on vehicle. How did you land on that sizing?

There’s this myth: small funds outperform big funds. That’s backed by real data, so let me explain what I mean. When people say that small funds outperform big funds, they think the critical factor is size. The actual critical factor is that as you get bigger in fund size, you usually start deploying capital at later stages, right? For example, if you’re a $1 billion multi-stage fund, most of your capital is probably going in at the Series B, C, and D rounds because you’re writing these big checks. And if you’re investing in these later rounds, that’s fundamentally lower beta, right? You can find alpha in all of these strategies, but inherently, your beta is lower – you’re paying a higher price and there’s lower risk. 

Smaller funds are usually focused on the early stages. When you’re talking about micro-funds, they can’t go and do Series C and or D deals. They’re going to chase pre-seed or seed. That’s high beta, high risk, high reward. Inherently, when you just deal with beta, if you average it out, the higher beta should produce higher returns because you took more risk. There’s a lot more volatility, of course. You can have some bad funds – there are plenty of them. But averaged across funds and over time, you should have higher returns if the market is efficient. 

First and foremost, we think: “What are we optimizing for as part of this giant asset class?” When you think about what the highest risk, highest return asset class in the private markets is – it’s in seed, right? 

That’s why, even as we’ve scaled the size of our funds, we’ve continued to focus on seed investing. That’s a big difference – you’ve kind of never seen this strategy before. Years ago, when we raised our second fund, $100 million, someone said, “Oh my god, an $100 million seed fund – I can’t believe it.” Our current fund is $275 million – I think it could get much bigger. 

How does it get bigger? Look, seed in 2022 in the US was $20 billion. That was half of the US venture market a decade ago, right? So seed is already at a certain amount of scale. If you’re running a $275 million fund with a three-year investment period, you’re doing maybe $70 million in deals a year…in a market that’s $20 billion a year just in one country. That’s not even globally. So there is a big enough pool of opportunities, a big enough TAM to say, “Hey, if I want to cherry-pick the best stuff in that seed pool, and if I can win it, I can have a great fund.”

That selectivity is key. We’ve talked a lot about beta – to optimize alpha at the early stages, you have to be really selective. It’s about being lower volume per investor, writing fewer checks. You have to make every bet count, not treat seed like an option bet. Think through it: “Do I really love this founder? Do I really love this opportunity?” You might be wrong, you might miss something, but it’s better to know that when you make a pick, you’re more likely to be right.

We make heavy bets upfront in the high beta part of the asset class. If you can do that effectively, you can have a great fund. When you start reserving capital for the later rounds – if you’re raising for the A or B, you’re starting to look like an A or B fund. We follow on some, but we’re not reserving super heavy. We want to deploy more than the majority of our capital at the seed. 

That’s really interesting. I want to dig a layer deeper on cadence. How many deals is the team doing a year, and how do you know you’re being sufficiently selective?

Every partner is doing two to three a year, at most. Across seven partners and three years, you’re looking at roughly 40 startups in the portfolio per fund.

We track the number of opportunities our partners look at. The tricky thing is that if I went on Twitter and said, “Hey, please send me your deck,” I would get 20,000 of them, and probably 99% will never raise a round. Rather than doing that, we only track the number of deals a partner looks at that went on to get funded by someone else. On average, each partner sees 100 deals a year that get done in the market and invests in two. So they’re passing on 98% of what someone else is doing. 

Our mantra is “wait for great.” We want our internal deal flow to look like: good, good, pick great. Not: crap, crap, pick good. It’s about staying disciplined. Our first two funds have been great because out of the first 35 deals we did, we had eight unicorns – all at seed. That doesn’t include Coupang or Jet, which I did personally before starting the firm. 

That is quite a hit rate. As you’ve scaled and grown the investment team, how do you ensure you’re hiring great pickers who can maintain or raise that bar? What do you look for when hiring an investor?

Number one: we look for investors who are students of their industry, of business, of startups, of tech, and of their craft.

Number two: they have to follow our ethos of aiming to be the most helpful investors on a startup’s cap table. And it’s not just about them specifically, but about how we approach it as a firm. It’s not just Emily Man leading fintech deals, but Emily Man, with 25 operators behind her helping with go-to-market and strategic finance. She brings this cavalry and says, “We will support you on this journey.” Some people don’t want to sign up for that work – some investors are backers, not builders. They like being the picker, writing a check, and waiting to see how it goes. We want people who want to help our founders build. 

Dealflow

We’ve talked about the deals Primary sees and keeping that bar high. From a sourcing perspective, where do most of your opportunities come from? Do you have any proprietary strategies for finding the next great company? 

Reputation is the best form of marketing. We start there as a baseline and tell ourselves, “Remember the mission, be the best investors on the cap table.” If you do that, great things happen. 

A good example of that happened just last week. An investor from SignalFire, who’s on the board of a startup with my partner Brian, posted something on LinkedIn saying, “Hey, I know venture is competitive, but I’ve worked on three things with Brian, and he’s best-in-class.” You should see the comments. It’s founders saying, “Can you introduce me?” What an amazing marketing engine. 

We do other things, like scraping LinkedIn and doing outbound outreach to people who put something on their profile like “Something New” or “Stealth.” Everyone’s kind of doing that now. But those people still have to take your call, they still have to open your email and respond. You won’t hear back from them if you don’t have a reputation. They’ll talk to their friends and say, “Primary messaged me, what do you think of them?” So, of all the things we do, it starts with showing up and serving our founders. 

After that, it’s about a lot of different tactics that everybody does, like building networks and throwing events. We just try to do them on a different scale.  

Once someone does answer your email or pick up your call, what does the internal process look like from there? How do you think about diligence and deciding on an investment? 

We want our investors to have agency. To be empowered to figure out where they’re going to hunt, how to pick the right stuff, and how they’re going to use our resources to win. When it comes to diligence, I don’t want to be prescriptive. I want to give you a chance to figure out your own path. Beg, borrow, and steal when you think it makes sense, but feel free to make your own path. 

In terms of the investment committee, we treat our vote as a veto. But if you want to do it, we will let you do it. The only time we wouldn’t is if we felt it was insane. It would have to be really stupid – like, this is firm suicide. We’ve never vetoed a deal so far.

While we’ve never vetoed a deal, we owe our partners our honest opinion. And then, once the deal is made, they deserve our unwavering support. 

How often is there meaningful disagreement at the investment committee? 

The majority of the time, I’d say. The way we handle it is that everyone on the investment committee – including junior members and people on the impact team – scores the investment. We never really go back and look at it, but we have a record. It’s a good way to let people share their point of view and talk about it. We can say to the sponsoring partner, “Hey, there’s a wide variety of opinions and scores here, but that shouldn’t deter you. If you want to do it, you should do it.” But people want that feedback because it forces your thinking and forces you to make sure you’re picking great. 

If you’re getting negative opinions from the room but still think, “Man, I want to do it,” that’s a good sign. To me, that shows that you have total conviction, even when other people have things they don’t like about it.

When you find a deal you want to do, how often do you win?

Our win rate over the last three years is 90%. That’s one of the core KPIs we track. We do lose sometimes – every deal we do is very competitive, with multiple term sheets – but it’s pretty rare. 

Here’s some of our secret sauce of how we win so much. We’ll invite a founder in when we issue our term sheet, saying we have a few final questions. Then, when they get to our office, they’ll find our whole firm in the conference room, ready to pop the champagne and celebrate. But then it’s our turn to pitch. We go through our deck and walk through it. It’s like, “Hey, this is why we’re so excited, this is our thesis, this is how we can be helpful.” Then someone on our People team goes, “You know, based on our diligence and your plan, you have to hire ten people. Let us show you the pipeline we can get for you today, right now.” Then someone from the go-to-market team says, “You need help getting in front of customers, we have a whole team that can help generate real leads for you on the market development side. Let us show you who we can introduce you to tomorrow.” 

As an entrepreneur, you sit there and think, “This is different.” That’s the “wow” moment of us selling to you and conveying why we are so radically different. And that usually takes us over the top to win. 

On a personal level, what is it that gets you super excited about a company? What’s your investment filter?

I’ve been doing this for 12 years and I’ve done 40 deals – as a seed investor. People are usually really surprised by that. It works out to about three, three-and-a-half deals per year. It all comes back to the idea of being low quantity. 

Out of those 40 deals, eight have been unicorns, and one of those is Coupang, which has a $30 billion market cap – so 30 unicorns in one. 

Out of those investments, though, I have looked at thousands of opportunities that have gone on to raise money. I missed plenty, too. Missed plenty that went on to become great companies. But I waited for great. 

It started with a great founder, that’s no surprise. What does that look like? They come in all shapes and sizes. The thing I ask myself that sort of galvanizes my thinking is: “Would I bet against this person?” You meet some people where you think, “Whatever this person does, I wouldn’t bet against them.” I don’t know Elon Musk, but if he said, “I’m going to go do this,” I’m not going to bet against him. He’s crazy, he’s an animal, and he’s probably going to figure it out. 

What are some other reasons you wouldn’t bet against someone? They’re incredibly smart – a learning machine. They’re able to sell, recruit, and raise money. There are so many factors, and some may index higher, but you add them all together, and you say, “Don’t bet against this person.”

That’s what I look for first and foremost because it’s the easiest way to filter. If you’re trying to get through thousands of deals, you have to cut fast. You’re getting pitched all these different business models in different markets. You ask yourself, “How do I get deep enough to make a judgment on those grounds?” It’s impossible. So the first, easy way to cut is to focus on if this is a person you’d bet against. By doing that, you can filter out 95%. 

The other thing I try to do is focus on underwriting the company’s ability to raise a Series A. Trying to predict if a company will become a unicorn 8 to 10 years out? You’re kidding yourself. Coupang, for example, started as a different business. Today, it’s the Amazon of Korea, but it started as a Groupon deals business – it’s 100% out of that today. Becoming Amazon was never part of Bom’s initial plan, so trying to predict that ten years in advance is just crazy. 

Focusing on the journey from seed to A is a much easier task – 18 to 24 months. If you do it well, you can really improve your hit rate. If you look at the data, when you get to a Series A, 60% get to a Series B, 60% of Series Bs get to a C, and 60% get to a D. It really is that clean. Unicorn rounds happen around Series D, E, or F, depending on the year. So if you want to get to a 20% unicorn hit rate from the seed, you have to have a graduation rate to the Series A of 80 to 90%. 

Now, that’s not that easy to do. But a lot of seed investors lose that kind of thinking, they say, “Oh, I think long-term about the business.” Sure, but the Series A investors are thinking about the business long term, too, but they want to see proof points that show you can get there. I optimize for that, and it’s a lot easier to underwrite. 

We’ve talked a good amount about the impact team, but I wanted to circle back to it. There’s a fair amount of skepticism in the market about the effectiveness of this kind of resourcing. I think a lot of people think of it as more of a marketing strategy than a true value-add. How do you validate it’s working for founders? 

I see that skepticism all the time. It’s one of the reasons we’ve shied away from even calling it a platform team. We get bucketed into this minimalist approach when most people at our firm are operators working on the impact team – not the investment team.

Part of the skepticism comes from the fact that running this model is expensive, so other firms are automatically incentivized to poo-poo it. If it works, the money to run it will come right out of their pocket, right? Jeff Bezos has this famous saying, “Your margin is my opportunity.” Well, guess what? Some of these funds are big enough where there’s real margin and fees, and it’s really profitable for the GPs that run that firm. There’s a commitment you have to tell your partner, “Hey dude, we’re not going to get rich off fees. We’re going to put it on the field and win. And we’re going to play for carry. If we get great funds, it’s going to be much better than the fees.” For a lot of people that’s hard to stomach: their kids go to private school, they have houses in the Hamptons. We’re talking about a lot of money.

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Well played to Tancrede T, Brian S, Kevin R, Shafiq W, Dhruv S, Gary J, Austin V, Krishna N, Rajeev S, Michael O, Emerson K, Abe M, Vivek N, Patrick P, Callum M, Quincy D, Patrick A, Shashwat N, Rohan S, Tze DN, John G, Michael C, and Anmol T for unraveling our last puzzler:

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Mario