Podcast Summary

Episode Overview

Podcast: How I Invest with David Weisburd
Episode: E312: The Power Law of Reputation in Venture Capital
Guest: David Hornik (August Capital, Lobby Capital)
Release Date: February 25, 2026

Theme:
This episode explores the critical role of ethics, reputation, and relationship-driven investing in venture capital. Drawing on David Hornik’s 25-year career from August Capital to Lobby Capital, the discussion unpacks how the "power law" of returns relates to the power law of reputation, and why being a consistently "nice" and ethical investor ultimately yields both career longevity and outlier venture outcomes.

Key Discussion Points & Insights

1. The Archetype of Great Founders and the Role of Ethics

• Ethics Above All:
  • Hornik insists he "will only back people who are unflinchingly ethical" ([00:22]).
  • Defines ethics as unwavering commitment to truthfulness: "If you are willing to stretch the truth, you are not unflinchingly ethical." ([00:32])
• Work Culture vs. Ethics:
  • Pressuring teams or focusing less on work-life balance is a cultural, not ethical, question ([00:51]).
  • "Selling something you know you can't deliver ... that is dishonesty." ([01:37])

2. Venture Outcomes, Power Laws, and the Reality of Failure

• Venture Is About Disappointment:
  • Hornik: "Venture capital is about disappointment ... one in ten of those companies has done the thing that I hoped was true of the other nine in ten." ([02:29]–[03:23])
  • If you back “astonishing people who you think are doing the right thing,” the 1-in-10 success model is viable.
• Handling Disappointment:
  • Despite the statistics, losing companies with great founders is always "catastrophic and has a real human toll" ([05:30]).
  • Early failures (“lemons ripen early”), but big wins can take over a decade. Example: Splunk, which took 11 years to go public ([05:30]–[07:14]).

3. Power Law Outcomes

• Concentration of Returns:
  • Four of Hornik’s investments became $10B+ public companies, each producing hundreds of millions in profits ([07:41]).
  • Many other investments went to zero or broke even, reflecting the classic venture capital power law.
  • Anecdote: One LP’s portfolio was 80% dependent on Uber pre-IPO ([08:52]).
• Host’s Reflection on the Math:
  • Small handful of companies drive most fund returns: in a 500 investment portfolio, 25 investments accounted for 77% of value ([08:24]).

4. The Compounding Nature of Reputation

• Reputation as Career Multiplier:
  • Hornik built a vast network, partly by founding the Lobby conference for entrepreneurs and investors ([10:47]).
  • "I've had the incredible fortune to touch a huge number of people and then it's up to you to have a reputation that makes that valuable." ([11:54])
• Transitive Property of Reputation:
  • Networks compound as introductions branch out (“if I have a deep relationship with you...and you have a deep relationship with someone else...I believe them to be an astonishing person until proven otherwise.”) ([13:03])

5. How Reputation Wins Deals

• Reputation as Differentiator:
  • To win competitive rounds: “Here's a list of everyone I've worked with... you should call them and understand what it means to work with me. I dare [other investors] to give you a list of everybody.” ([17:17])
  • Track record: In Lobby Capital’s first fund, 22 term sheets, just one loss—beating top firms, thanks to network and reputation ([17:17]).

6. Nice Guys Finish First—Eventually

• Roots in Research:
  • Article “Nice Guys Finish First Eventually” (2012): Critiques academic research claiming selfishness wins in negotiations.
  • “There is no such thing in our world as a one-off negotiation...if you take the position that my job here is to help make you successful...that is a compounding asset that you have.” ([15:08])
• The Truth About Givers, Takers, and Matchers:
  • Cites Adam Grant’s "Give and Take": Givers are the most successful (and sometimes the least, if they allow themselves to be exploited).
  • "The ones who say, how can I help you be successful?...those people...are astonishingly successful.” ([27:09])

7. Practical Strategies for Relationship-Driven Investing

• Best Practices for Giving:
  • Hornik offers time to students and introductions, believing "it makes the planet better" and is a high-leverage use of time ([28:30]).
  • “You can’t get to that outcome other than saying, how can I be helpful?” ([30:31])
• Giving at Scale:
  • Multiplicative (not just additive) acts—such as running a conference, writing a blog, or hosting a podcast—are effective for growing network/reputation ([31:47], [32:03]).

8. IQ vs EQ in Venture

• Not Just IQ:
  • High IQ alone is not sufficient: “If you can’t articulate the opportunity...if you can’t articulate the reasons in which the problem you’re solving, how are you going to convince people to give you money?” ([33:27])
  • Examples of founders (Figma’s Dylan Field, Twitter founders): EQ essential for leadership and company-building ([34:41]).
• Hornik’s Stance:
  • "I would choose EQ before I choose IQ." ([36:53])

9. Lessons and Regrets

• Biggest Lesson:
  • “To me, it is all about the people.” Turning down big companies is less regrettable than partnering with the wrong people ([37:19]).
• Process Change:
  • Will never fund entrepreneurs until he’s spent enough unstructured time with them. “...Until I have spent a couple or three hours with you...I may make a mistake about who you actually are.” ([40:00])

Notable Quotes & Memorable Moments

• Ethics in Investing:

  • "I will only back people who are unflinchingly ethical." — David Hornik ([00:22])
  • "Selling something you know you can't deliver ... that is dishonesty." — David Hornik ([01:37])

• Venture and Disappointment:

  • “Venture capital is about disappointment.” — David Hornik ([02:29])

• The Power Law:

  • “One in ten of those companies has done the thing that I hoped was true of the other nine in ten.” — David Hornik ([03:26])

• Reputation:

  • “The way our firm wins deals is we are referred to great opportunities by the people who trust us the most, who believe in us.” — David Hornik ([17:17])

• On Givers:

  • “The ones who say, how can I help you be successful?...those people...are astonishingly successful.” — David Hornik ([27:09])

• EQ vs IQ:

  • “I would choose EQ before I choose IQ.” — David Hornik ([36:53])
  • “You can’t get to that outcome other than saying, how can I be helpful?” — David Hornik ([30:31])

• Self-Reflection:

  • “If I had to choose between betting on you or betting on me, I’d bet on me.” — David Hornik, describing his early VC confidence ([38:35])

• Human Connection:

  • “If you spend enough time with people, they reveal who they are." — David Hornik ([40:32])

Timestamps for Key Segments

| Timestamp | Topic/Segment | |-----------|---------------| | 00:22 | Ethics as investing filter | | 01:37 | Culture vs. Ethics and honesty in startup promises | | 02:19 | The emotional reality of venture returns | | 05:30 | Human toll of startup failures, importance of founder relationships | | 07:41 | Real-life power law outcomes from Hornik's portfolio | | 10:47 | Compounding reputation over a career; power of the Lobby conference | | 13:03 | The transitive property of reputation | | 15:08 | The case for “Nice Guys Finish First Eventually” | | 17:17 | Tactics for winning deals via reputation | | 28:30 | Practical approach to being a giver; compounding value of giving | | 31:47 | Giving at scale: conference, blog, podcast | | 33:27 | EQ vs. IQ in picking and supporting founders | | 36:53 | Choosing EQ before IQ in investing decisions | | 40:00 | Never funding without in-depth personal interaction |

Tone and Style

The conversation is candid, introspective, occasionally humorous, and marked by Hornik’s emphasis on humility, relationships, and ethics. Both host and guest ground their insights in real experience, often referencing past research, personal anecdotes, and practical advice for investors and founders.

Summary Takeaway

In venture capital, outsized success is achieved not just by chasing high IQ individuals or playing zero-sum games, but by rigorously adhering to ethics, cultivating trust, and building reputational capital over decades. Relationships are the real compounding asset, and reputation—good or bad—will ultimately drive who gets access, who wins the best deals, and who endures beyond the short-term VC lottery.