Tag: Startups

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Finance Startups

Day 181 and Thesis Trends

As I was putting down scratch notes for Chaotic.Capital’s thesis yesterday on the types of businesses we like I thought I’d do a bit more stream of consciousness writing to discuss some of the mega-trends that I see driving returns over the next decade.

Embedded Functionality

We think more and more businesses will be born of the embedded functionality inside protocol layers or data sets. Many protocols have functionality embedded across different layers of utility and functionality. For instance, the new consumer bank is an API at heart. The protocol layer is the API and the embedded functionality is the financial services layers enabled through the protocol or application layer. Need another example. Retail sales data and demand trends give rise to fashion retailers. Think of StitchFix, the clothing brand is the embedded functionality of its aggregate trend, recommendation and demand data set.


Unbundling Trust

Trust based networks rule businesses like insurance, retail banking, law and financing. But what if trust was unbundled from institutional nexuses of power. What if we built trust from value creation instead of value extraction. DeFi wants to build permission-less trust based on a protocol. Its entirely possible we bundle trust back into the wisdom of crowds and markets. Wall Street Bets is an aggregate source of unbundled trust. Figuring out what layers can be stripped away for more efficiency and what layers we need for safety and peace of mind are unsolved problems.


Data Ingestion Is Value Creation. The more capacity we have for data collection the more demand we will have for data ingestion and processing. While we can say sure businesses rely on the protocol and data and that unbundles trust, that’s not the full picture. We will need people who make sense of the chaos for the muggles. Ordered systems give the impression of serendipity for their users (an introduction on a social network, a recommendation for a loan, an outfit customized for you) but the work required to intake and order the data to create value for users is a big hairy problem. And there is a lot money to be made in those. Centralization may come at this layer especially in user experience.

Flexible Asset Weighting.

We are also interested in businesses that know where they stand with capital needs for their business. If you are executional business you need a thin layer of assets to succeed. To quote Roy Bahat “hot swap” startups are executional businesses. A slim horizontal physical layer to take advantage of low financing costs means return on equity is greater for these asset light businesses. If it’s deep innovation then you can be asset heavy. We like those just fine too. But knowing where you stand and anchoring your business case on your asset weighting can give you an edge. That lets you be capabilities based and find opportunities, particularly as debt as is in a commoditization cycle.


All of this is to say we are thinking across a number of system level problems to unearth startups that will give flexibility to individuals, organizations, industries and hopefully the entire economy. Incumbents won’t see who is coming to beat them because they won’t recognize the new predators. They prioritize value systems that at won’t remain true as systemic chaos erodes inefficient businesses and institutions.

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Finance Startups

Day 180 and Thesis

As I see more pitches and work with more entrepreneurs I am finding it helpful to have my thoughts codified on paper. That way if you are interested in working with me you have a chance to vet me. Knowing what I want to see in a deal and what just isn’t a fit saves entrepreneurs time. So I’m going to doodle a bit on what I do and don’t like.

Chaotic.Capital has 4 key investment areas. But they are really just different levels of working with an uncertain future: at the individual level, the organization level, the systems level and the planetary level.

  • Personal Flexibility is critical when it’s harder to make long term lifestyle decisions (housing, health, children) – how do we allow people to make those decisions without anchoring themselves to place or time horizons that limit optionality. Businesses like marketplaces, preparedness, personal safety, service & product exchanges, health tech, longevity, and alternative credentials.
  • Organizational Agility is a differentiator for businesses in rapidly changing landscapes, so we invest in software and tooling that provides leverage for small teams to have a bigger impact or bigger teams to act more discretely and independently. Businesses like software as a service, cloud infrastructure, collaboration & coordination software, DAOS (decentralized autonomous organizations), automation software, and memetic and organizational aids.
  • Systemic Arbitrage opportunities are even greater in chaos. Working through systems level chaos helps individual and organizations protect against cascade and systemic collapse risk, mitigate political chaos, regulatory uncertainty, memetic crowd and mob behaviors, or medical chaos, just to name a few. Businesses like intelligence, decentralized finance tooling and exchanges, cryptocurrencies, bots & analytics.
  • Climate or planetary risk is an existential risk that is already fucking with our world – we like companies mitigate the chaos of climate change while profiting on the risk. Businesses like mobility, insurance, green tech.

What I don’t like to hear are pitches for things that are tangentially related or a forced connection. Sometimes folks will try to get us excited about a problem they’ve already solved and are scaling but we are looking for longer time horizons. There are plenty of amazing startups that have great returns but aren’t a fit for us. We really do want the crazy weird stuff that is going to take a while.

We don’t need you to know where you are going. We want to see ten or twenty year out timelines. What would life look like without school? How about a world where we didn’t pay taxes based on our geographic location. How about a world where we automate how our attention is allocated. Or a world where our financial power isn’t rooted through centralized trusted powers. We want 1000x leverage on change.

I’ll write more later this week about the types of companies I don’t want to invest in. Not because I don’t like them but because they just don’t match what this fund is meant to do.

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Emotional Work Startups

Day 176 and Bias Against Action

There is a phrase popular amongst early stage startups meant to encourage faster problem solving; bias for action. It gained popularity as one of Amazon’s core principles.

Speed matters in business. Many decisions and actions are reversible and do not need extensive study. We value calculated risk taking.

Generally speaking this is a straight forward positive principle that individuals and organizations benefit from. It’s easy to become paralyzed by overthinking. The average person overweight risk and organizations are even more prone to this. Action is good when faced with external friction. And startups in particular can be killed by friction. I think a bias towards action is default good. I regularly use this methodology to make decisions for my life. In the face of uncertainty acting is often better than not.

But I’m learning that my tendency to “just do it” has some downsides. If I’m always trying to fit in more action, more decisions, more outcomes, then I can easily burn myself out. I can waste precious energy by always saying “yes” let’s do it. My enthusiasm can and does get the best of me. In other words, I’ve got a bias towards action that needs to be balanced out.

It’s hard for me to emotionally recognize that I need more of a bias against action. But I’m not saddled with the traditional issues that make a bias towards action necessary. I don’t struggle with willpower. I don’t struggle with meeting my commitments (short of being physically unable to work say 80 hour work weeks). Hell, I just decided on January first I would write something every day no matter what, and here I am almost halfway through my first year. When I commit to taking an action I generally mean it. Sometimes to my detriment given my workaholism.

So I’m reassessing when I personally need a bias towards action. Maybe I need to have a bias towards inaction so I do not let my enthusiasm for getting shit done set me back. I need to have a bias towards rest. I need to have a bias towards naps. I’d encourage you to ask yourself which side of the issue you come down on. Maybe it’s a bias towards action. That’s great! Do more and faster. But it’s also possible you are like me. Less can be more.

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Emotional Work Startups

Day 174 and Easy for You

I’m not normally the type that reads business books. I’m pretty disinterested in management techniques and organizational structures because I suck at it. And I bring up sucking at MBA style topics because as I was doomscrolling I came across an older article from the Harvard Business Review. The headline was “why do talented people not play to their strengths?” I clicked.

It begins with fairly standard case study chit chat about the NFL and I’ll admit my eyes glazed over. Why had I bothered to click when I’m so not the business school type. And then I spotted a nugget that rang so true I swear I’ve got a little tinnitus from the “ding ding ding” bell that rang in my head.

We often undervalue what we inherently do well.

I’ve written in the past about my struggle to accept things that come easy to me. I have had a self limiting belief about the necessity of struggle and it’s inherent morality. Maybe I’m rationalizing pain and hardship because emotionally I need there to be a “why” for having fought through a chronic illness. Surely suffering through and taming a spinal disease has made me a better person right? Or maybe shit just happens.

And maybe I’ve been downplaying all of the many super power and talents I have. I’ve spent so much time grieving the loss of the hard things like working long hours and always hustling that I’ve been ignoring that i can win doing things that feel easy. Because they might just be easy for me but not easy for everyone. Quoting the article.

Often our “superpowers” are things we do effortlessly, almost reflexively, like breathing. When a boss identifies these talents and asks you to do something that uses your superpower, you may think, “But that’s so easy. It’s too easy.” It may feel that your boss doesn’t trust you to take on a more challenging assignment or otherwise doesn’t value you — because you don’t value your innate talents as much as you do the skills that have been hard-won.

Working long hours were always hard for me. I fought to stay up late because I would find myself fatigued and in pain. I really valued that because it hurt me. It was hard for me. Whereas I never valued being at being ahead on news and trends, or my facility at gaining media coverage, or how easy I found it to spot when the market was going to move. I distrust the skills I can do effortlessly.

But I realize now that those are valuable skills. It makes me a good investor, especially in private markets where seeing where the market is going and alerting people to potential is very well remunerated. So next time you scoff at a compliment from somewhere on you work ask yourself if what you did is easy or just easy for you. You might be surprised to find you have a superpower you never noticed.

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Aesthetics Internet Culture

Day 167 and the Naughties

I arrived in New York City in January of 2006. The aughts were an interesting time to be in New York. The recovery from 9/11 gave the city a sense of resilience but the Great Recession hadn’t reshaped the financial landscape of the country just yet.

I moved to Manhattan because I wanted to work in fashion. I didn’t have any relevant experience. I’d studied economics. But I was a blogger and that turned out to be enough to find a way in.

I met a man in the comments section of our respective fashion blogs as back then back links were an acceptable form of socializing. We both moved to the city the same week. He would become my cofounder on a fashion media startup and also my boyfriend. Yes it’s as dysfunctional as it sounds. Don’t worry we are still friends.

We’ve got a lot of fond memories of the Aughts. New media was just coming into its own. The possibility that it might change industries like fashion seemed exciting and democratic for style. No one had figured out how to grift by “influencing” yet. Which meant actual influence was still possible.

That first generation of bloggers was more influential in moving industries like culture than the commercial milieu we have now. Less lucrative certainly but the impact was significant. Good stuff actually emerged from living instead of someone imitating living.

My friend (the ex and cofounder) are considering writing a chronicle of our time. Partially it’s an exercise in nostalgia. It was a lot of fun. Maybe it’s a bit of an ego trip to think we could’ve even write some fiction that ties together the ethos and the aesthetics of that moment.

Back then we hadn’t cracked up the media industrial complex into algorithms and big automated ads dollars. A lot more got done in restaurants, bars and parties. The city itself hadn’t turned over into the complete plutocracy that dominates now. The kleptocrats needed the financial industry to implode and get bailed out for that kind of real estate takeover. Before the bailouts maybe the rest of us good maintain the delusion that we too could strike it rich. Now the distance is too great.

It was an era when Condé Nast mattered. Finance was a thing the cute guys with ambitions for money did, not yet a space that was entirely populated by Hedge Fund guys set on moving to Planet Billionaire.

And holy fuck the parties were great. Classes mingled more without the stratification that came out of the Great Recession. You could be someone even if you lived in a shitty barely heated no hot water squat loft on Bowery. It still cost $1600 but better than the 16K a month I saw it go for recently. You could get into club if you had some style. Instead of convincing people you mattered because you had a bunch of followers you had to convince someone you were cool.

I know this all sounds like bullshit old person nonsense mumbling about past good times. So if we do write about the Aughts it will take a lot better writing to make it compelling. I think it’s possible as I still retain a sense of place that I think is worth sharing. I’ve got ridiculous stories that could make for a fun read. So I’m putting the energy into the universe that I’ll capture those moments and share.

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Emotional Work Startups

Day 166 and Safe Advice

Mistakes are expensive in the moment but priceless long term. This is why failed founders are so respected and sought after in the startup ecosystem. Their advice is the best money cannot buy. Money literally cannot buy the experience that comes from having utterly fucked yourself.

Sure maybe you lost a couple million bucks but you will never make the same mistake again. And because it hurts so god damn bad you will go out of your way to help others to avoid your fate. I’ve found that founders with failures are generous. They have seen the ways even the best laid plans can implode and want to help you from doing the same.

This is why it’s all the more frustrating for these operators watch a startup struggle to take advice. Speaking as a founder with failures, I know when someone else is about to make the mistakes I’ve made. I feel it in my bones. But it’s not always easy to help people help themselves.

Getting someone to an emotional place where they can hear that they too are about to fuck up their professional life takes love. Psychological safety is crucial to hearing someone else.

I have a theory that it feels safer to hear a hard piece of advice when it comes from someone you know is delivering it without ego. Someone who never seems to have struggled a day in their life tends to evoke our own feelings of inadequacy. Their advice could never work for us because we aren’t as smart, rich, connected or sexy as they are. But someone with scars? Sure maybe they get why this is so hard for us.

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Startups

Day 159 and Friction

Everyone has their mental models and super powers that make them unique. While I’ve written about my more specific skills like getting attention, one of my other super powers is a bit further down the stack.

I think I have a naturally immunity to the friction of inertia. The slow stickiness of life doesn’t seem to impact me as much as the average person. Generating momentum is my natural state. I guess this means my X-Men doppelgänger is the Juggernaut.

Juggernaut from X-Men: Last Stand saying “I’m the Juggernaut Bitch”

Startups suffer particularly from inertia around them. The world pushes back actively against changes. Think of inertia like eddies in the stream of linear time. You must get unstuck or you will circle forever alongside the stream, never getting anywhere while watching as others get ferried down the currents. That’s why I recommend to startups that they simply do whatever is necessary to generate momentum. Get the fuck out of the eddies of inertia.

When you are pushing against existing reality to make something new, you already need to significantly reduce friction just to get a shot on goal. You need to change opinions, learn new skills, bring together a team, work well together.

And that doesn’t even mean you will make the goal, even if all preparation work that goes right. All of that momentum you generated simply to have an opening. Yeah even then you can still fail. The market, your underdeveloped skills, your competitors, sheer dumb luck all have a chance to block your goal. That means you need to be undeterred by failure. You need to overcome friction consistently.

Overcome the inertia and the friction to keep taking more shots is your best chance. Probability likes your odds from five shots better than one.

Categories
Startups

Day 155 and Momentum

Startups don’t really operate on logic, plans or “objectives and key results” to name and shame. Founders and executive teams get really good at planning and strategies only to have it all blow up in their faces. Generating momentum in spite of startups being incredibly resistant to planning is part of the trick.

I’ve been thinking a lot about the emotions that go into that “no plan survives contact with the enemy” reality of startup life. The past two days Alex and I have been enjoying a victory lap after the 1.8B acquisition of his former startup Stack Overflow. It’s a process of mixed emotions and shared experiences with other families that lived it with us.

But one central theme is that nothing changed in our skills, planning, insight or capabilities after we got the market validation. We didn’t suddenly get better and got rewarded overnight. Our plans got exploded like everyone else in startup land, over and over and over again. Till one day it was worth a bunch of money. Now everyone involved looks like a genius. But the reality is that the momentum of startups live a life and logic unto themselves. No one set an OKR for “billions” nor did they plan out a straight line from day 1 on acquiring customers consistently. No one planned out a ten year roadmap for creating enough value or revenue for a substantial exit. No one micromanaged shit for a decade. The momentum just worked itself out eventually.

And yes I’m using the Royal We here but mostly to make a point. Startups and their teams and the entire ecosystem around them are team efforts. Together we turn nebulously ideas into sketchy plans and eventually great things. Don’t get so wrapped up into the need to manage everything so closely.

A graph showing a bell curve distribution. The two outlier “make stuff”

The momentum of making stuff can and should eventually pull you into your goals. So don’t kid yourself all your numbers or plans do shit. Be the Jedi.

Categories
Internet Culture Startups

Day 154 and Mixed Feelings

I’ve been in a hazy “did that happen place” emotionally after the news that Stack Overflow, where my husband spent 8.5 years, sold for $1.8B. Obviously it’s a lot of money to just appear into our lives. It’s not the first exit for Alex Miller or me. I’ve had 2 acquisitions for companies I have founded & he’s had an IPO for a company he was early to join. I also lived through multiple exits, financings IPOs & bankruptcies as a kid as I’m the child of a startup family. So why does this hit different?

I think part of it is that our other wins tended to come from “faster” companies. My first acquisition came within 2 years of founding. It wasn’t a lot of money but let me pay off student debt & get more stable. Alex was with Yext for a comparably shorter period and when it IPO’d he’d long ago left for Stack Overflow. And that was only a win because he was lucky enough to be able to borrow money to exercise his Yext options or it would have meant nothing. That happens a lot to early stage employees. They cannot afford to exercise and get nothing when a big exit happens. It happened to me when the company that bought mine exited to someone even bigger. I couldn’t afford to exercise. I never had the heart to calculate how much I would have made.

We’ve had secondaries over the years. Sometimes equity gets taken off the table in later stages financings and it benefits early employees. Those changed our calculus a lot when it happened to us. We put together a financial plan and a future as a family with our startup earnings. We made decisions based on whose turn it was to risk & who to run downside. Being a startup spouse means a constantly balancing act of supporting years of low salaries, long hours and stress. And while it’s not easy to be the wife of an early stage employee it’s probably even harder to be the husband of a founder. Startup families live through a lot together.

Stack Overflow was “the” company in many ways for Alex where he spent the better part of a decade and the majority of our marriage working to build the company up. He was employee 32 when he joined as chief of staff. When he left it was over 300 employees and he was the GM of the SaaS business.

When he left Stack we didn’t expect a payday beyond what salary he had earned and perhaps a bit of secondaries. He’d done good work and built amazing things but when you leave you don’t want have the emotional capacity to think about things like big acquisitions or IPOs. When Alex left Stack it was a deeply emotional process for us. A lot of therapy for both of us. Because startups aren’t just the person it is their family that consents as well to these long journeys. Remember that every executive team member or founder has a family that will live through this startup experience too.

After 8 years I knew Alex needed a change. He had given Stack his all. His absolute best. But leaving was hard. In order to leave a company where you invested your whole self (and your family’s) you have to come to terms with how you feel. We cried. We worried. But Alex made the choice. And we didn’t look back. It’s too painful in some ways. You love your startup

You keep in touch with everyone. Alex remains friends with the entire team. We share hobbies & interests and a million group texts with topics as varied as hydroponic tomatoes m, our crypto portfolios and hunting season. We stay at each other’s homes. The bond is deep in startup teams.

Given that bond it’s almost funny how when you leave your imagination on big outcomes can stop. The thing you dedicated yourself to for years is now growing and thriving without you. It never leaves you even if you need some distance.

When we got the call the number was overwhelming. The distance we had created suddenly evaporated. Alex burst into my room where I was meditating and told me the strike pierce. We did some calculations. We checked them. It couldn’t be? It was. The startup had finally delivered the check. We’d done it. Another startup made it.

I want people to know that this kind of largess is mostly random. Everyone works hard in Silicon Valley. Startups are a choice & a state of mind and those of us that chose to do it willingly go into ideas doomed to failure. Or meant for the stars. And it can feel like a crap shoot. Idiots get enormous paydays and brilliant innovators barely make enough to scrape by. The meritocracy isn’t as real as we think. This isn’t to suggest that the Stack Overflow team doesn’t deserve every penny. They do. We earned the payout. The bad years were hard. Miserable. But everyone believed in the community & the power of software developers. But also no one earns these big paydays. It’s a gift. And we are grateful for it.

Categories
Emotional Work Startups

Day 153 and Startup Families

I’ve worked my entire career in startups. I love it. But the work barely compares to being a member of a startup family. My entire life has been lived, literally from the day I was born, in the ecosystem of families that make startups come to life.

I was “in it” from conception and all my success and traumas are in some way tied back to that luck. And I became a startup founder and eventually a startup wife. This post is about what it’s like to live in perpetual uncertainty of creation with the occasional bout of life changing money.

For everyone that has a payday that changed their lives forever, chances are they have spent decades in the shadow of that system of building, scaling, and selling companies. The paydays are sporadic, completely dependent on luck and often extremely unfair. Most of the time the early team sees nothing. I’ve personally had an exit where I got nothing. I’ve had an exit where I couldn’t afford to exercise my options so when the company that bought mine exited I didn’t see a dime. So I know how fundamentally random startup life can be. How unfair it can feel. Because today it is our turn to be the beneficiary of the unwarranted success.

My husband Alex’s long time home Stack Overflow, sold for 1.8B dollars today. And yes we are one of the 61 families that will see more than a million dollars from it. But it’s not all joyful excitement in our house. Because it’s not about not just about money. It never has been. In my family it’s always been about belief. And it’s really hard to reconcile the many competing emotions that come with a liquidity event. It’s the culmination of much work and time from everyone.

My father proudly reminds me that when I was born, he didn’t have a job as he was pitching an education startup. What a blessing to have the energy of one’s life be aligned with risk from the start. And also what a curse. My family had incredible boom years where money wasn’t a concern coupled with devastating financial and emotional ruin as companies went to zero and markets crashed. My father sacrificed so much for his dreams. He saw the value of software and took his wife and children to the promised land of Silicon Valley. And oh it was glorious. And oh how it hurt.

I have fond memories of Comdex, elaborate company cruises and board meetings during “take your daughter to work day.” I also remember my father not being there for birthdays, for dinner, for milestones because he was busy building the future. I don’t remember my parents getting divorced, because I suppressed the memories. Family trauma can be like that. The good and the bad exist at the same time. When my father went bankrupt in the Web 1 crash, I was so angry at him for not being more careful, I didn’t speak to him for years. And then I made the choice to become a founder myself. Despite my fury and sadness and hurt I too decided to live my father’s path. And then I married a man who walks it too. I guess the Bojack Horseman joke got it right.

You inherit your parents’ trauma but will never fully understand it. Haha the cop is a cat.

The day you get news you made life changing money is bittersweet because all the trauma of being a startup family member catch’s you to you. You remember the sacrifice of your whole family going back years. The long nights and missed time together. The choices to prioritize the company over your family. In our case 10 years but of course for me it’s been my entire life.

The entirety of my marriage with Alex and my entire relationship with him before was spent at Stack Overflow. I’ve seen the hard work and the pride. I’ve also seen the exhaustion and the agony when something went badly wrong. The hurt when teammates left and the fear of leaving yourself eventually. People grow up together at startups. Other more practical logistics show that not everyone wins. The hard decisions you make when it’s time to leave and you cannot afford to exercise your options are a unique pain. We just three weeks ago sold something in secondaries to afford the taxes to exercise ours. That’s timing and dumb luck. Almost absurdly so. We could easily not be in the position we are. Exits are the end goal and yet not everyone gets to make it despite equal sacrifices. It’s all random and no one deserves any of it. But it changes your life if it does happen.