2023 - Cup of Zhou

December 29, 2023December 29, 2023

2023 Year in Review

Our tiny blue marble has spun yet another lap around its closest star. From a job change to starting a podcast, between visiting Japan for the first time (and holy frick is Japan amazing!) and blacksmithing my own santoku chef knife while I was there, and from building the most unlikely friendships that will last for decades to come to realizing life rarely goes according to plan — a good reminder of Mike Tyson’s line: “Everybody has a plan until they get punches in the face.” — and from attempting to convey my year in one sentence to realizing this is the longest run-on sentence I’ve written on my blog to date, it’s been a great year.

While I wasn’t aware of this till recently — courtesy of doom-scrolling on Instagram, this year’s been a year where I’ve “used the difficulty.” To echo the amazing Sir Michael Caine. For those unfamiliar with the phrase, I highly recommend listening to the full 2002 interview, but at least this.

In short, you can’t always control the situation you’ve been given, but you can control how you react to it. If you want your life to play out like a comedy. If you want it play out as a drama. Or if you want it to play out like a feel-good movie. Use the difficulty to your advantage and act accordingly.

By the numbers

Interestingly enough, despite writing whatever I find fascinating on a weekly basis — in other words, not optimized for search engines — just under half of my blog’s views come from search engines. Primarily, and I mean 95% of which from Google. Followed by LinkedIn (which accounts about a third of my views) then Twitter (~7%).

As many other aspects of life, the viewership of my blogposts also have a Pareto distribution, where they seemingly follow the power law. With my top blogpost winning more than twice the views of the second highest. And the second highest with double the audience of the third highest, before the views plateau out across all the rest of my essays. Even for this year alone, my most popular blogpost is eight times more popular than my second most popular.

And every week I feel honored that I have readers like you who tune in to my weekly musings and our family has only grown since.

Something I’ve noticed when looking at the numbers is that I seem to have the most readers arrive at this humble piece of virtual real estate every October, barring 2021. And I wonder if it’s a function of the market’s interest crests then or that I just happen to write better pieces around then.

In addition I’ve started measuring my habits since October, only to realize, holy hell, I am inconsistent with them. While I’d love to blame travel and work, the simple truth is it’s hard to manage what I didn’t measure before. Hopefully in 2024, we’ll see a lot more consistency.

P.S. the last day, aka today, is down, since the day’s just started and I haven’t logged in anything yet. And for those curious, I’m tracking this all on a Notion dashboard.

But my favorite thing that I started measuring, is that little trophy icon in the first column of the “Evening” section. And that little trophy stands for: “Was today truly worth it?” Defined by me learning a new skill. Gaining a brand new insight about the world. Or created a core memory. And I’m happy to say that that box gets checked about two times per week. 🙂

Post publish edit: The last icon is often how I take a cold dunk/shower, as opposed to a hot one. Having friends, former housemates, and my partner exclaim and tell me “I know you shower more often than that” made me realize that icons don’t do some things justice.

2023’s Most Popular

The Science of Selling – Early DPI Benchmarks — One of my favorite lines from Jerry Colonna’s book Reboot is: “It’s buy low, sell high. Not buy lowest, sell highest.” In the world of VC, we spend a lot of time talking about when to buy, how to buy, and who to invest in. But rarely about the other side of the playbook, selling. Or exiting positions. And while different investors have shared the what behind selling — in other words, the exact percentage they sold at, how much they sold when they could — this blogpost was one of the first, and maybe first (who knows), to explore the why and how behind selling positions in portfolio companies as a private investor.
The Non-Obvious Emerging LP Playbook — The blogpost that set me down the path I am now on. To explore how I can help the next generation of capital allocators is investing into the innovation economy. Simply put, the emerging LPs.
Five Tactical Lessons After Hosting 100+ Fireside Chats — In fairness, had no idea this blogpost was going to do as well as it did. And luckily, I am now able to stress-test and get better at asking questions and hosting interviews through not only what I continue to do in the world of venture, but also through my new podcast, Superclusters. Where you’ll see some of my learnings above in action.
10 Letters of Thanks to 10 People who Changed my Life — In all honesty, it still befuddles me to this day how this blogpost consistently ranks this high. I don’t namedrop here, and I don’t use any clever SEO techniques, yet every day this blogpost seems to find organic interest. Nevertheless, I’m glad it has. And if it empowers people to be more grateful to the people around them, I’ll have done my job. There’s also a deficit of content and knowledge here for sure, but I’m still trying to figure out what that something is.
How to Think about LP Construction — Not all LPs are created equal. It’s something I’ve known for a while. Both in conversation with other LPs and GPs, but also in learning of the different types of motivations to be an LP. For some, VC is an access class, not an asset class. For others, it’s the exact opposite. The latter is more likely to be a large institution. Nevertheless, that’s one example of many. And it was incredibly rewarding to hear GPs I really respect share what they’ve learned across multiple funds.

All-Time Most Popular

The Science of Selling – Early DPI Benchmarks — Turns out you all love tactical frameworks, so my goal is to share a lot more with you in 2024. I have a couple in the works as we speak (or as I write this).
The Non-Obvious Emerging LP Playbook — Stay tuned for more content on this front!
10 Letters of Thanks to 10 People who Changed my Life — If anything, I hope this inspires people to write one note or letter or record a voice note of thanks to someone who’s helped you become the person you are today.
99 Pieces of Unsolicited, (Possibly) Ungooglable Startup Advice — Don’t worry already in works of many more iterations of this. And while I can’t promise when the next one will come out since it’s I’m really only including what I think are the best pieces and most tactical pieces of advice, I will say it’s a matter of when not if. I’m 20 in for the founder one. And 12 in for the investor one.
Five Tactical Lessons After Hosting 100+ Fireside Chats — I’ve a feeling this one won’t age well, but hell, maybe it ends up being like the #3 spot on giving thanks. Time will tell.
How to Pitch VCs Without Ever Having to Send the Pitch Deck — Back in 2021, I knew that this blogpost was going to hold an evergreen spot up here. And I’m pretty sure it’ll flirt around here even longer. While it’s only been two years since, and while there’s also a mountain of public resources on how to pitch, strangely, most people still struggle to connect to the people they want to. And it’s true for both founders and VCs. Ya, the latter seems ironic, until you see that founders are pitch judges, juries and executioners as well. For them, from talent. Until you also see that our parents are often the harshest critics of our decisions. Yet some have no experience working in the world in which we do. All that to say, oftentimes it’s easier being the judge than the judged. I can’t claim much of the insight here as original, but rather have to thank the fact I have really smart friends. Smarter than me at least. The flip side to the wild performance of this essay may just be one of the closest titles I have to being clickbait-y.

2023’s Most Memorable

In all honesty, the most memorable each year to me were ones where I was scratching my own itch. Some, by the numbers, perform better than others. But for me, each of the below represent the greatest delta in either knowledge acquisition or insight development. Of course, not mutually exclusive to each other.

The Science of Re-upping — I enjoyed writing this one in particular not only because I got to work with Arkady and Dave on this — two minds I greatly admire, but it also became the perfect opportunity to learn more about the world of professional sports beyond the players and scores themselves. Two birds with one stone. I’ve always admired folks who are able to pull from various, seemingly disparate topics and analogize them to venture. And while I still have many more miles on my odometer to go, this was one of the amazing opportunities to take a stab at marrying two different worlds through stories.
How to Think about LP Construction — I will admittedly take any opportunity I can to talk to my favorite people. And this was another one of them. That said, to get them all in the same metaphoric room to talk about the same topic, where the energy of one inspired another, now that’s something special. Funnily enough I did the vast majority of these interviews for this blogpost asynchronously, but upon sharing the final product with the group the week before publication, there was an incredible amount of energy (gratitude, stand up comedy routines, and so on) in the group. And all this was over email.
The Science of Selling – Early DPI Benchmarks — This, in many ways, was an accidental piece. Not only did it come up in conversation over Friday brunch quite randomly (serendipity at its finest), it also took, at least compared to the above two, the least amount of time to write. The first draft was ready in about an hour. And including all the edits, it came out to about two hours of work. It’s a gentle reminder that sometimes your best pieces are the easiest to write.
My Ever-Evolving Personal CRM — I wrote this blogpost after some coercion from a small group of friends who’ve been fascinated by how I stay in touch with people. And when they saw how I did it on Airtable, they asked if I would sell them my template (not that I had one at the time). Nor am I selling now. But nevertheless, the web of what we do, who we talk to, who we grow with, and why we do things is increasingly complicated and so far, there hasn’t been a great product out there that tracks this (and yes, I’ve used all the CRM tools out there). And so I created my own.
#unfiltered #83 There Doesn’t Have to be a First Place — I really enjoyed writing this one. Inspired by a podcast appearance by Simon Coronel, I learned that in the world of magic competitions, first place isn’t always granted. If the judges feel like a magic act isn’t on par with previous years, even if it is the best one that competition, they choose not to award a first place. Similarly, I think the world in a lot of ways has lost itself in the noise. That our definition for quality has fallen in the past decade. And I’m sure the older generations will harken back further. But I do believe a heuristic like this keeps us honest and that as a society, we move forward together, not just optimizing for short-term maximizations.
#unfiltered #78 The Gravitational Force of Accumulated Knowledge — Another fun piece to write about the power of how knowledge compounds. Not only in isolation, but also collectively. While that is a rather obvious fact, I loved the reframing of how to look at it from Seth Godin and Bill Gurley’s public interviews.
How to Retain Talent When You Don’t Have the Cash — One of the biggest lessons I learned at On Deck was that the team was amazing — in fact, world-class — at acquiring the best talent, but was shy on retaining the world’s best talent. To this day, I believe I have never worked in a higher concentration of brilliant talent than I did when I was at On Deck. And this blogpost is an homage to my former team, how brilliant they were, but also the lessons we took away from that experience.
7 Lessons from My Time at On Deck — And in the theme of On Deck, and how much I treasure the people I work with and the experience I had while I was there, last but not least, the culmination of lessons I took away from an 18-month period that I would never trade for any other experience.

And I started a podcast. Superclusters. (Or here’s on Spotify or Apple Podcasts if you prefer). It’s still too early to tell how Season 1 will do, with only six episodes in (the most recent of which here). But by next year, I should have more than enough to share about my learnings here. But early data seems to suggest that people love true stories more than they do tactics.

Until the next, stay awesome! And see y’all in the new year!

Photo by Polina Kuzovkova on Unsplash

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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.

February 17, 2023February 17, 2023

To Bridge or Not to Bridge

In the wonderful world of venture, an investor takes a different kind of bet with each stage as a function of industry. For instance, a pre-seed SaaS product, it’s a distribution risk. Can this founder sell this product to others? In general, the angel or pre-seed round is often a founder bet. Can this founder or founding team pull off their vision? And subsequently, if they’re able to achieve their milestones in the funding window, will those milestones excite downstream capital?

One of the greatest byproducts in starting my career in venture as a scout — sending seed and Series A deals to those respective investors — was that I learned what archetypes of deals interested them. And what didn’t. As I moved even earlier in the funnel, so, pre-seed and seed, I could help founders and their teams set themselves up for the subsequent round.

Admittedly, that became a bit harder to do in the hoorah of 2020 and 2021 — with insane multiples and raises coming together as a function of FOMO.

When looking at the present day, mid-February of 2023, one in three or four deals in my inbox is a company raising a bridge. The bet here is an execution bet. Now before I get into the questions I consider when a founder pitches a bridge fundraise, I think it’ll be helpful to consider bridge rounds as a function of good and bad markets. And why they make more sense in a bull market, for better or worse, than in a bear market.

Bridge and venture debt

In a bull market, bridge rounds — or preemptive rounds, pick your nomenclature — and pay-to-play rounds make sense. The promise of capital within six months is extremely likely. Interest rates are low enough, where equity instruments have greater return potential than debt instruments. In a similar way, the same can be said for the premise behind venture debt. Venture debt (I am but an armchair expert at best, but have been lucky to query some of the best) is debt that is issued with the expectation of another round. At the same time, the warning label here is in a few-fold:

Many VCs prefer not to have investors higher than them on preference stack.
Subsequent equity raises are used to pay back venture debt first.
You have a 36-month repayment period usually, after if you decide to use the capital within the first 12 months or not.
There are usually warrants that ask for additional ownership in the company on top of the loan.

But I digress. In a bear market, bridge markets make less sense for an investor. Bridge rounds usually occur when teams miss expectations. They’ve missed milestones. Their burn rate was higher than expected. And their runway is naught but less than a year. It’s way the most common recommendation VCs gave their portfolio companies in 2022 was have at least a 24-month runway. You have more wiggle room to prove assumptions and get to an inflection point.

In a bull market, missing expectations is almost impossible. Sky high valuation multiples and funding rounds made capital cheap. When capital’s cheap, founders are more likely to spend with less discipline than otherwise. Moreover, consumers felt richer. Their net worth appreciated in a good economy. Interest rates lag inflationary signs. And the money is out of the pocket before it has time to warm up. Consumers also not only spend more, but they invest more. Companies saw greater revenue numbers and market cap growth, leading to more liberal spending habits. Greater market budgets to acquire customers. That spending led to high burn multiples.

This all led to a virtuous flywheel, that though growth and revenue numbers hit, the cost to get there also exponentially grew. The quality of businesses declined, as consumers and companies got used to the spending habits of the good times. Those same habits, unfortunately, don’t work in a recessionary market. And when founders are unable to part with their multiple in a boom market, and for many, the spend during that same market, they go to raise a bridge round instead of offering new equity, hoping they’ll, in some way, “make it work.” And yes, that’s the exact wording some founders used.

If investors have the chance to place new shots on goal, a lot of investors today are willing to bear the opportunity cost of passing on a bridge round.

Inflection points and lack thereof

Each new round is raised on the assumption your company is at an inflection point. Right as your second derivative shifts from negative to positive. To some businesses, that’s a market inflection. A (lucky) black swan event. A technological release. Or a regulatory easing. To others, it’s a traction inflection. Users just love your product. And to another cohort, not mutually exclusive to the afore-two inflections, is an insight inflection. You’ve learned something that’s going to catapult you so much further. For Duolingo in 2012, it’s the realization of going mobile. For Zynga, in 2010, it was its partnership with a rising class of platform usage, social media, namely Facebook.

On the other hand, for Airbnb, in 2011, its major competitor abroad, Wimdu raised $90 million to focus on its European expansion. That meant if Airbnb didn’t expand outside of the US, they would lose access to a whole market of Europeans but also Americans whose vacation destinations were one of the seven continents. To the Airbnb team, in the words of Jonathan Golden, their first PM, it was the realization that “marketplaces are normally winner-take-all markets” and “when competition comes after you, move ridiculously fast.” And they did.

Bridge rounds often don’t carry that same drive or momentum. It’s not raised at an inflection point, but rather in efforts to get to one. Usually it’s not proving a new assumption but last round’s assumptions. As I mentioned at the top, it’s an execution bet. And as such, it begs the question: How much conviction do I have that a founder is going to be a great steward of capital?

Fortunately or unfortunately, unlike most other early-stage round constructions, there are multiple data points. Have they used capital to date efficiently and effectively? If so, do I believe this founder will 10x their KPIs within this funding window?

Usually the funding window I allude to is 12 to 18 months. In the scenario of a bridge, that timeline becomes six months. The expectations are less forgiving and more aggressive. What are you building to in half a year? Do you have the discipline to execute on that goal? Does your track record corroborate? Do you have a detailed plan to get there?

In closing

IVP’s Tom Loverro recently shared, “A half measure is usually something a management team lands on because it’s easy. If a decision is easy, it’s probably a half measure. If it’s hard, if it’s really damn hard… if it’s controversial, you’re probably doing enough of it. The other thing is a half measure often doesn’t have an end result or goal in mind. If you have a really specific goal, and implementing that goal is difficult, that’s probably doing your job. That’s probably what’s necessary.”

A bridge round, more often than not, is a half measure.

He goes on to say, “If it’s a good company, give them a lot of capital. If not, zero.”

This past week, I chatted with three institutional LPs, and three more venture investors about this topic. In five out of six conversations, one phrase made its appearance. “Don’t put good money after bad.” And while anecdotal, all six — every single one having participated in bridge rounds at some point in their investing career — concluded money was better spent in new investments than in bridge rounds. The caveat from these conversations was that it may work if you are either leading the round or setting the terms. Then again, that’s favorable for an investor, and may not be as much for the founders.

That said, I’m sure there’ll still be great companies raising bridges. But who knows… I await the day, not just in outliers, that we see bridge rounds trend otherwise. For that to happen, I agree with many of my colleagues that we need to see a lot more discipline from the average founder.

Photo by Terrance Raper on Unsplash