Spotlight #1: Nick Davidov

Some people are destined to succeed.

Of them, only a handful rise so gracefully that ecosystems succeed beside them. It’s character, before all else.

Such people are exceptional. They carry the vision, the grit, and the risk tolerance to identify opportunities, stay nimble, and ride their troubles to success. Emboldened by meaning, they surf the border between order and chaos so biblically that our world’s finest stand before them. It’s character, before all else.

In my life, the best kind of success arrives as a byproduct. It isn’t chased, or coveted, or optimized for. It’s a side effect of accepting the adventure of my life, alongside those I trust, and speaking truth to uncertainty. In this way, business is a game. Life itself is a game. And when we play games we truly love, we don’t obsess over outcomes. Outcomes are byproducts of a game passionately played. The best games cultivate an existential imperative to rise against all odds, and act as though we already are what we could be. It’s character before all else.

I live my life inspired by those who embody exceptionalism and wield it with grace. They’re all around me; and for that, I’m truly lucky. It is for this reason, alone, that I started not only RTF’s Spotlight series, but Return the Fund itself.

I’m excited to bring forth our very first RTF reader Spotlight—someone whom many of you already know. Nick Davidov is exceptional.

He built conglomerates in Russia, started from scratch in California, sold a handful of companies to FAANG, and alongside his wife Marina, built the most prolific venture consortium in SF. Davidovs Venture Collective (DVC) invests in hot AI deals alongside Tier 1 funds. Its 160 members are ex-founders, investors, and high-ranking angels from Apple, OpenAI, Google, and similarly pivotal institutions.

In co-investing, sourcing, and supporting founders in a manner unique to themselves, DVC’s members are the embodiment of synergy. You’ll see the DVC method in the stories that follow.

Quick recap on Spotlights

• RTF Spotlights are not sponsored by the spotlighted. They’re guided purely by curiosity and enabled by somewhat randomly-selected readers graciously lending their time.

• You could be next. Many of you have already received an interest form.

• I encourage you, reader, to deeply imagine the story that follows. And, to think of how you might participate in DVC (psst! founders, fund investors, and angels). Nick Davidov is an RTF reader, just like you, and thus the doors to involvement are open. You’ll see what I mean at the end.

I took so much away from my time spent with Nick. Not only will I lay out insights from our conversation, I’ll postulate the common thread between his successes and show you what comes next.

In today’s spotlight

• Who is Nick Davidov? Background, prior companies, current objectives

• Thoughts on Zuck’s hiring spree, on unsustainable trends in VC, on talent arbitrage opportunities, on the next AI paradigms, and on product pricing models built for an AI-first world

• DVC, top-tier deal flow, unique philosophy, and resulting success

BEFORE WE START — MADE POSSIBLE BY PACASO

How 433 Investors Unlocked 400X Return Potential

Institutional investors back startups to unlock outsized returns. Meanwhile, regular investors have to wait. But not anymore. Thanks to regulatory updates, some companies are doing things differently.

Take Revolut. In 2016, 433 regular people invested an average of $2,730. Today? They got a 400X buyout offer from the company, as Revolut’s valuation increased 89,900%. 

No wonder 10K+ everyday investors are taking the chance on Pacaso. 

Founded by a former Zillow exec, Pacaso’s co-ownership tech reshapes the $1.3T vacation home market. They’ve earned $110M+ in gross profit to date, including 41% YoY growth in 2024 alone. They even reserved the Nasdaq ticker PCSO.

The same early investors that backed Uber, Venmo, and eBay also backed Pacaso. And you can join them. But not for long. Pacaso’s investment opportunity officially ends September 18.

_{This is a paid advertisement for Pacaso’s Regulation A offering. Read the offering circular at invest.pacaso.com. Reserving a ticker symbol is not a guarantee that the company will go public. Listing on the NASDAQ is subject to approvals. Comparisons to other companies being for informational purposes and should not imply similar results.}

From startup to $120M fund to almost-IPO to international relocation to huge Facebook acquisition to big tech acquihire arbitrage to computer vision to DVC, I’m out of breath.

Russia

Nick Davidov’s journey defies convention. Born into the crucible of Russia’s complex markets, he learned how to create luck.

Through his first venture, a microcomputers hardware startup in Russia, Nick met an investor with whom he started a fund. The pair raised $120M, invested in 18 companies, and hit some incredible home runs. TradingView was one of them. Still on the cap table, TradingView alone returned the fund multiple times over. But that wasn’t enough—they also invested in the ecommerce giant Ecwid (acquired for $500M), in Bitfury, and in a handful of others exiting for 3-5x.

It’s hard to hit the ground running in venture; let alone, outside the US or EU. Nick and company did it from Russia, and I don’t attribute their success to luck. More on that later.

The two were inspired by Yury Milner, creator of Mail.ru Group. Yury wanted to own not only a large email company, but a conglomerate of tech behemoths. So, he consolidated networking firms and invested in upcoming U.S. companies like Facebook, Twitter, Airbnb, and Spotify while they were still private. He then IPO’d the bundle, finally making highly-coveted American enterprises available to Russian investors.

Nick followed a similar path, but focused on marketing companies. He invested in a handful of ad agencies, merging them together into a single $170M ARR entity doing $30M EBITDA. After an incredible run of success, the holding was about to list on the Nasdaq… Until, Crimea’s annexation put a spanner in the works. Their lead pre-IPO investor dropped out, the listing fell apart, and all they were left with was a $200k breakup fee. Ouch.

This was a pivotal moment in Nick’s, and his wife Marina’s, backstory. Instead of trying it all again, Nick thought deeply about whether Russia was conducive to raising funds and starting companies. Ultimately, he felt that the primary objective of the regime was to maintain power, not to uplift technological innovation. Nick and Marina then packed their bags for Silicon Valley to start from scratch.

Growth exists on a scale distinct from success and failure.

Although Nick’s first microcomputers company never took off, it led to a mindboggling run of startup checks. And although their ad agency conglomerate never IPO’d, its construction was highly successful. Plotting mergers in a spreadsheet is well and good—combining cultures in a manner that de-risks operations is a whole other challenge. But they did it nonetheless. To what, then, is their success owed? Not luck.

San Francisco

Shortly after arriving in California, Nick joined Masquerade. A familiar name, in hindsight. :) In the 2010s, MSQRD built real-time filters, face swapping, camera masks, facial expression tracking, and augmented reality. Nick headed comms and marketing, taking MSQRD to 30M users in 3 months, not before stopping at Jimmy Kimmel Live and the Oscars on the way.

After talks of an acquisition first began, Nick and team leveraged their way up through buyers until landing at Facebook. Then, on March 9th of 2016, the deal went through.

This was yet another pivotal moment in Nick’s history, not only for the financial unlock. Now in San Francisco, Nick began deeply understanding the inner workings of big tech. He learned, through experience, how to work them to his benefit. And in seeing their inefficiencies and irrationalities, he locked on an opportunity to create an arbitrage.

Arbitrages abound in markets wherein participants have distorted senses of value. Today, the principle of buying gold on one exchange and selling it on another is a pipe dream reserved for 101 textbooks. But that doesn’t mean arbitrages aren’t real, or possible.

What causes distortion of value? Bubbles, and feedback loops within an ecosystem. Value distortion happens when 90% of a community can’t peel their eyes away from 1% of it posting on X. Worse, on LinkedIn.

They see a Bay Area company raising a $200M Series B.

Scroll.

A researcher paid $1 BILLION in TC to join Meta.

Scroll.

“Pre-revenue companies” (a.k.a. 2 guys in a room) raising a $20M seed from ambitious investors gasping for air as they drown in FOMO. Justified by the founders’ alma mater.

Don’t get me wrong—many of these companies are Earth-changing. And backing young talent is not only good for the world, but highly profitable. But it’s hard to ignore the distortion clouding the air around rational thought.

Our world is small, and yet, we unnecessarily shrink it. Nick found teams in post-Soviet countries creating exceptional software, overlooked by the venture/tech ecosystem. He built alongside them, guided them, and often marched them right into a big tech acquisition. One of Nick’s greatest successes was Prisma, still operating. Prisma grew to 100M users in 9 months. Lucky? I think not.

Cherry Labs

The Prisma success put Nick and Marina back into founder mode.

In 2017, they started Cherry Labs, a computer vision company named after their dog. I’ll tell you why in a moment. Cherry Labs’ mission was to create intelligence enabling robots to understand our world the way humans do.

This was prior to the mass proliferation of large language models, when computer vision was the talk of the town—the pinnacle of machine learning with unlimited potential.

Nick’s dog, Cherry, would bark whenever someone, or something, acted abnormally. It could be a subtle mannerism, an aura, mood, even the weather. Humans react this way every second, responding to subtle cues without a thought. Cherry Labs answered the question of how to bring this intuition to robots; starting with vision.

The technical challenge was immense. Nick’s team layered autoencoders to disentangle human actions. At a high level, they used neural nets to compress and reconstruct data, capturing and isolating essential relevant features. By applying them to video data, Cherry Labs could extract and separate different components of human movements, enabling machines to interpret and respond accurately.

Sidebar: schools of thought in AI

This approach falls within the Yann LeCun school of AI thought. In the face of multimodal language model die-hards, Yann asserts that autoregressive transformers are not the be-all and end-all to intelligence. He built JEPA and I-JEPA, a new model architecture creating internal abstract representations of images and videos.

Most modern AI systems are generative modelers: they randomly hide/distort parts of text/images, then guess what’s missing. I-JEPA, on the other hand, uses joint embeddings to first predict the abstract meaning or vector representation of what’s missing, rather than reconstructing the exact appearance (pixel colors).

Back to Nick

Cherry Labs sold their vision systems to Tesla and PepsiCo, ensuring workers didn’t become injury statistics.

They worked with elderly health/safety institutions, often adding years to people’s longevity. The company sold in 2021, along with their big tech acquihire arbitrage business.

Nick and Marina went into COVID with a pile of cash and an existential desire to build something that meaningfully tied together their life experience. Thus, DVC was born.

The VC paradox

Nick has a unique vantage point on one of venture’s fundamental contradictions: scalability.

Having built and invested in companies big and small, Nick experienced different levels of investor involvement. His takeaway? You can scale businesses, but you can’t scale venture capital itself.

Before you think “what about a16z?” and dismiss this proposition entirely, hear its case.

Nick explains: the only recipe VCs have found to scale is raising more from LPs, increasing AUM, collecting more management fees, and hiring others to invest—hoping they’re at least as good as the founding consortium. It rarely works.

Goldilocks

Take Benchmark Capital, juxtaposed with a16z. Benchmark refuses to grow AUM, producing 6 unicorns from 45 investments. Incredible returns, but not scalable. Even a pinnacle firm like Bessemer, ranking 3rd in fundraising over the last 5 years, makes 1.5 to 1.8x as many investments as Benchmark to mimic their unicorn count. Then you have a16z: 11 unicorns from 650 investments. With a wildly different philosophy, a16z generates massive dollar returns despite the lower hit rate.

It’s already hard to LP in an a16z fund. Their LP turnover is around 1-2 years. Bessemer is much more difficult, with a turnover of 2-5+ years. And then you have Benchmark: typically over 10 years; otherwise, impossible.

“Take my money!” falls on cold ears. This is the state of top-tier venture capital, and a demonstration of its lack of scalability.

Angels

Nick shared a few stories of his experiences with investors. For a particular megafund we won’t name, he remembered spending countless sleepless nights preparing a deck and materials only for their representative to quite literally fall asleep during their meeting.

A presentation should never end with “good morning.”

Unless you’re in a megafund’s highest tier, already performing, you’re just a statistic—number 539 of 650. Today’s funds don’t have the decentralism required to horizontally support portfolio companies at scale.

Angels were different. One coded in their office every Saturday. A Facebook executive hiked with them weekly, brainstorming. An Apple Hardware Lab engineer spent weeks contributing ideas. These people weren't just wiring money. They were right there alongside their founders.

(Thankfully, they are humble, useful people; otherwise, this level of investor involvement can quickly border on unbearable.)

Nick and Marina built DVC to scale humans, built upon the energy and track record of humble, useful people.

DVC

Nick and Marina raised a seed fund from 162 engineers, founders, researchers, and full-time angels. Every one of them is highly involved with sourcing, diligence, and founder operations. Nick says it’s like having 162 decentralized partners.

DVC’s model is radically collaborative. In this way, it’s incredibly attractive to not only founders and LPs, but to co-investors. A Tier 1 seed investor sharing an allocation with DVC is akin to hiring 162 successful founders and powerful operators to support the company.

It’s just math, and first principles: for the seed investor, the opportunity cost of their forgone allocation is outweighed by the network’s upside, many times over. Simple.

One of my favorite DVC stories captures this perfectly. A founder was building a music business requiring a Google API that was no longer serviced. He was about to acquire another company for millions just to access an alternate API. One weekend, he went hiking with a DVC angel: a Google engineer staffed on YouTube. The engineer's response? "I'll just enable it for you." Problem solved. No acquisition needed.

DVC operates on radical meritocracy. A percentage of carry goes to members who meaningfully help portfolio companies. When someone found Perplexity's lead hire for their Comet browser, DVC gave them carry from the investment. Everyone has skin in the game. If you do extra, you get more.

The results speak for themselves. DVC co-invests with First Round Capital, Sequoia, NEA, Khosla, Thiel Capital, and other top-tier lead seed investors. Their portfolio companies average a whopping 22 months of runway. They are very well run.

The Higgsfield AI founders ($20M ARR) met through DVC. Cactus, backed by Sequoia and First Round, was seeded by DVC with founders meeting within the collective. Just to name a couple.

Thoughts on the future

Shovels

We discussed the reality of take-home earnings for AI companies. What does $100M ARR mean if half of it churns every year, and 90 cents of every dollar goes to distributed providers?

Nick conducted a study within the collective to understand how much OpenAI and Nvidia pocket from every dollar earned by a user-facing AI company. What they found? OpenAI gets $0.50, the startup keeps $0.44, and rest goes to infrastructure. Seems good for OpenAI, until you realize how much OpenAI’s chunk goes to Nvidia. Dizzying.

The Next Wave

Nick’s take: the agent infrastructure wave is closing. The future is vertically-integrated rollups. Harkens to his past with ad agencies, and Milner’s with Mail.ru Group. Empowered by AI, companies will facilitate transactions across the stack and collect much more value. (A nice deflationary effect in most markets).

Other than that? Specialized robotics. Cracking the intuition and intelligence code, likely through alternate model architectures (ex. the Yann LeCun approach), will be incredibly lucrative and positive for humanity.

Broken Pricing Models

Per-seat pricing is dead, but SaaS isn't. Nick uses Semrush as an example: he loves the tool, but lacks time to use it personally. Now, AI agents trigger it whenever someone within DVC flags a company. Seats are down, usage is up exponentially. Companies mustn’t freak out over the death of per-seat pricing. Understand the usage opportunity, and get ahead of the shift.

The "charge based on savings" model is equally doomed. If you charge 20% of what a human employee would cost, someone will undercut you at 15%, then 10%, racing to the bottom until hitting cost-plus-margin equilibrium.

Getting involved with DVC

Before I share my thoughts on the absence of luck in Nick’s backstory, here’s how you can get involved with the DVC ecosystem if you’re so inclined.

Invest: DVC's seed fund is at regulatory capacity, but they're raising a $75M Series A fund that's nearly fully subscribed. Return the Fund angels will get some special treatment though, so hit reply if you’re interested in participating.

Build: You’ve seen the DVC method, and how pivotal angels are to the ecosystem’s usefulness. If you’re curious about joining DVC as a founder, hit reply with a couple sentences about your company.

The thread

I keep returning to one question: what, specifically, enables Nick to succeed time and time again? Let’s be real—the track record is a bit ridiculous.

It's not luck. I can’t emphasize this point enough.

The best I can muster is pattern recognition married with relentless execution. Nick sees arbitrages others miss. But seeing isn't enough. Nick executes like a rare few, building incredible systems that realize value from these insights.

And then, there’s character. More importantly than anything I’ve mentioned, he builds with grace. DVC isn't extractive, like most institutions. It's symbiotic. Members contribute and receive. Founders get a path, a car, a co-pilot, and fuel in the tank. Not just a check. The ecosystem thrives because everyone wins together, by design.

They’re not afraid of levity.

Again I say, it’s character before all else. Nick plays games worth playing. He builds ventures that matter, with people who care, solving problems that count. Success follows not as the goal but as the natural consequence of excellence pursued with purpose.

With that, I close out Return the Fund’s first Spotlight inspired beyond measure. Character, relentlessness, obsession, and love of the game. Every day, I hope to instill these in my own companies, in my relationships, and in my life. Outcomes as a byproduct.

Success is a shiny facade over the adventure of our lives.

For Startup Navigators—a shortcut to getting involved with DVC. →

Subscribe to Startup Navigator to read the rest.