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The Full Ratchet

500. AI Native VC, Achieving 50%+ Graduation from Seed to Series A, Why Access Is the Key to Success, and Why Network Driven Firms Can No Longer Compete (Ben Orthlieb)

46 min episode · 2 min read
·
Ben Orthlieb

Episode

46 min

Read time

2 min

Topics

Productivity, Relationships, Investing

AI-Generated Summary

Key Takeaways

  • Automated Sourcing Filter: Blue Moon screens 12,000 companies annually down to 500 using unsupervised machine learning trained on seed deals since 2008, evaluating founder teams across education, experience, and personality signals to predict seed-to-Series B success probability.
  • Three-Layer Selection Strategy: Combining AI founder filtering (24% graduation rate), co-investing with top 40-50 VCs (35% rate), and deep personal founder conversations produces 48% graduation rate compared to 14% market baseline through systematic advantage stacking.
  • Founder Psychology Over Business: Blue Moon conducts deeply personal conversations exploring founder motivations, childhood experiences, and irrational commitment drivers rather than business models, creating relationship depth that produces 97% win rates on desired deals with $250K checks.
  • Intelligence Platform Advantage: Custom-built system scrapes 120+ sources including podcasts and substacks, generates company analysis cards shared with founders pre-meeting, monitors 30,000 websites weekly for engagement signals, and scores every VC for co-investment quality assessment.

What It Covers

Ben Orthlieb explains how Blue Moon achieves 48% seed-to-Series A graduation rates versus 14% market average through AI-native operations, automated sourcing of 12,000 companies yearly, and founder-focused selection criteria.

Key Questions Answered

  • Automated Sourcing Filter: Blue Moon screens 12,000 companies annually down to 500 using unsupervised machine learning trained on seed deals since 2008, evaluating founder teams across education, experience, and personality signals to predict seed-to-Series B success probability.
  • Three-Layer Selection Strategy: Combining AI founder filtering (24% graduation rate), co-investing with top 40-50 VCs (35% rate), and deep personal founder conversations produces 48% graduation rate compared to 14% market baseline through systematic advantage stacking.
  • Founder Psychology Over Business: Blue Moon conducts deeply personal conversations exploring founder motivations, childhood experiences, and irrational commitment drivers rather than business models, creating relationship depth that produces 97% win rates on desired deals with $250K checks.
  • Intelligence Platform Advantage: Custom-built system scrapes 120+ sources including podcasts and substacks, generates company analysis cards shared with founders pre-meeting, monitors 30,000 websites weekly for engagement signals, and scores every VC for co-investment quality assessment.

Notable Moment

Blue Moon passed on Perplexity at $90M valuation due to strict price discipline, then revised their approach after recognizing that extreme outlier outcomes make entry price irrelevant compared to missing transformational companies entirely.

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Episode Transcript

Today's episode of TFR is brought to you by .techdomains. The right .com is usually taken, and adding extra words weakens your signal. I see thousands of decks every year, and a clean domain still matters. That's why founders choose .tech. It's simple, modern, and sends the right signal. Secure your .tech domain early. And this episode of TFR is brought to you by the American Arbitration Association, where smart startups and investors turn for fast, efficient, and cost effective dispute resolution. Visit adr.org/tfr to learn more. Now here's the episode. Welcome to the podcast about venture capital, where investors and founders alike can learn how VCs make decisions and reach conviction. Your host is Nick Moran, and this is the full ratchet. Ben Orthlieb joins us today from San Francisco. He's the cofounder and general partner at Blue Moon, a seed stage venture firm investing in b to b startups across North America. Before Blue Moon, Ben held senior leadership roles at LinkedIn and Oracle. He's invested in unicorns, including Merkor and DevRev. And, Blue Moon is outperforming the rest of the market, by a significant margin in terms of graduation rates. I think it's on the order of two or three x the industry average. So he's here to today to explain how he's doing it with his AI native approach to firm building. They've really been smart at seeing everything and investing in the best ones. So, Ben, welcome to the show. And, and, Ben, what is the thesis at Blue Moon? Blue Moon is what we would call what we call an AI native fund. At Seed, we effectively back exceptional founders with smaller checks, and the way we're different is through our operations, we effectively see everything, know everything, win everything, and, obviously, we have confidence in seeing that from the results from Fund one. But that means for us that we've built effectively an intelligence platform that helps us take the best decision. So it's not AI replacing humans, but it is a fun operating with a lot of products that we've developed in house. I see. The core of the pieces is all of this is to help us found find the best founders, and that's that's what we look for. That's what we invest in. We don't have a space thesis. Our thesis is if you back a lot of exceptional founders, the power load works very well for you. Love it. And then I know you've said the traditional venture model is hitting a wall. Why? There's three components, I think, of traditional venture, maybe four. One is if you back up ten years ago, the traditional story pitch from a VC, both through their LPs and through founders is I have highly differentiated networks. I have a brand. Then operationally, it meant people were still able to manage their time properly and and and win win deals when they wanted to. All of this has evolved. Networks have effectively became …

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