I’ve been doing some thinking as of late in and out of the shower. In conversations. In reexamining my own investment thesis. And changing it as a function of scar tissue and tears of joy. As such, sharing a few shower thoughts below that for the below, might be better described as a tweet than in a long-form blogpost.
About founders
- A community or 1000 true fans built without big brands and logos is far more impressive than a community built by leveraging someone else’s brands.
- 20 years of experience is more impressive than 20 one-year experiences for deeply technical problems.
- 20 one-year experiences is more impressive than 20 years of experience for cultural (consumer) problems.
- Great founders don’t delegate understanding. Senior execs aren’t hired until founders themselves prove out the playbook.
- In the age of AI, new information is more valuable than remixes of old. Standing out is more important than fitting in. The latter of which will be replaced with by AI given the wealth of data out there. (Ironically, this line is inspired by old conversations plus Sriram Krishnan’s blogpost)
- Revenue matters more than traffic for consumer products since AI bots can now mimic simple digital human behavior.
- Silicon Valley / SF Bay Area is strong because of the high quality of eavesdropping. There are so many ideas being thrown around in coffee shops. It’s quite easy to stumble across a world-class lesson without paying $2000 for a conference ticket. Things sure have changed since ’08.
About investors
- In early stage venture, debates on price is a lagging indicator of conviction, or more so, lack thereof.
- Price also matters a lot more for big funds than small funds.
- Price also matters more for Series B+ funds.
- Will caveat that there’s an ocean of difference between $10M and $25M valuation. But it’s semantics between $10M and $12M valuation. How big your slice of the pie is doesn’t matter if the pie doesn’t grow.
- Not saying that it’s correlated, but it does remind me of a Kissinger quote: “The reason that university politics is so vicious is because stakes are so small.”
- The reasons Fund I’s and II’s outperform are likely:
- Chips on shoulders mean they hustle more to find the best deals. They have to search where big funds aren’t or come in sooner than big funds do.
- Small fund size is easier to return than a larger fund size.
- Rarely do they have ownership targets (nor do they need significant ownership to return the fund). Meaning they’re collaborative and friendly on the cap table, aka with most other investors, especially big lead investors.
- Price matters less. Big funds really have to play the price game a little bit more since (1) likely to be investing in multiple stages with reserves, and price matters more past the Series A than before, and (2) they’re constrained by check size, ownership targets, and therefore price in order to still have a fund returner.
- “Judge me on how good my good ideas are, not how bad my bad ideas are.” — Ben Affleck when writing Good Will Hunting. A lot of being a VC is like that. Hell, a lot of being a founder is like that.
- We like to cite the power law a lot. Where 20% of our investments account for 80% of our returns. But if we were to apply that line of thinking two more times. Aka 4% (20 x 20%) of our investments account for 64% of our returns. Then 0.8% account for 51.2% of our returns. If you really think about it, if you invest in 100 companies, we see in a lot of great portfolios where a single investment return more than 50% of the historical returns.
Photo by Mark Rabe on Unsplash
#unfiltered is a series where I share my raw thoughts and unfiltered commentary about anything and everything. It’s not designed to go down smoothly like the best cup of cappuccino you’ve ever had (although here‘s where I found mine), more like the lonely coffee bean still struggling to find its identity (which also may one day find its way into a more thesis-driven blogpost). Who knows? The possibilities are endless.
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The views expressed on this blogpost are for informational purposes only. None of the views expressed herein constitute legal, investment, business, or tax advice. Any allusions or references to funds or companies are for illustrative purposes only, and should not be relied upon as investment recommendations. Consult a professional investment advisor prior to making any investment decisions.