Tag: Venture Capital

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Finance Startups

Day 270 and The Circle of Capital

Capital has evolved a lot in my life. The dynamics have changed so much in the 30 years I’ve been ambiently around venture it’s barely the same business. And yes I mean since I was a kid. The apocryphal family history is that I was born on the poor side of Silicon Valley while my unemployed father was working on pitch deck for education software. Yeah it’s a shitty origin story but it’s mine.

Back then you sold your entire life to some dudes for half a million bucks and gave up a lot of control. It wasn’t really collaborative but it was worth it to create the future. Back then your VCs controlled a lot more than they do now for capital they deployed. Flexibility and collaboration wasn’t really considered necessary. Your VCs actually controlled when you got fired (another childhood memory was a “take your daughter to work day” where a CEO got fired), when you could raise again, if and when you could sell your company, and honestly I wouldn’t be shocked if they had some Rumplestiltskin provisions too. That’s just where the market was at the time.

As it has become clear that non-linear returns come from creative founders and new markets, the structures of capital deployment have changed a lot. Capital cares about helping operators create because creation simply has more value than it did in the past. Venture capital isn’t old dudes optimizing for control and margin anymore (even if sometimes that might be a good idea) because that’s just not what makes money anymore.

Heck it has changed a lot in just half a decade. The last time I raised venture for my own startup, we actually priced the round (no uncapped SAFEs), we had a board from day one, and we were allowed to overshoot our valuation and capital goals by a whopping 300K. I was sure we’d reached the height of founder leverage at the time. Heck I felt certain we’d raised a small fortune on favorable & flexible terms. Six years later that would be considered a charmingly small pre-seed round with very onerous terms. Time marches on! And rightly so. Markets adapt to the needs of the participants and the returns they deliver. If it wasn’t profitable it wouldn’t be so.

This is all a long winded way of saying that I am continuing the circle of life. I’ve got my own venture fund Chaotic Capital with Alex Miller and Jacob Brody. It doesn’t look anything like the funds of my childhood or even the seed stage funds of the last decade. Probably because we as founders and operators lived through the hard lessons of venture in multiple cycles and took a lot of lessons with us. Capital isn’t about control. It’s about collaboration now. Capital starts early. Capital is flexible to generate returns But we also aren’t n00bs.

Rather than spend a year raising in silence and announcing it once it’s all said and done we are building a rolling fund. That structure works for us and my general affinity for building in public. It signals founders we are building like them (even as our other constituents see it as being responsive to the demands of the market). The rolling fund is a kind of flexibility to build at the speed of the market while also understanding that the give and take of responsible deployment must also work at the pace of founders.

While we work on forming our proper fund, we’ve created an AngelList Syndicate for chaotic where we’ll be creating SPVs for our current deals (we already have our first two which feels crazy to me) as well as follow-on deals once the fund is created. If you’re an accredited investor and interested in joining our deals, head on over. Isn’t it cool how these structures morph and change over time? I guess having a couple decades of being an operator has some benefits. You’ve seen what works and hopefully have some capacity to change what needs to be changed.

Our LPs and co-investors are mostly our friends and former colleagues who have spent years working with us at companies as varied and diverse as Stack Overflow, Trello, Easypost, Triplelift, Goop, PopSugar and over 40 different angel investments. Alex Miller, Jacob Brody and I have invested over 4m over the years which seems sort of astonishing.

While we work on forming our proper fund, we’ve created an AngelList Syndicate for chaotic where we’ll be creating SPVs for our current deals (we already have our first two!) as well as follow-on deals once the fund is created. If you’re an accredited investor and interested in joining our deals, head on over.

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Finance Startups

Day 255 and Bias Towards Fuckround

There is a tendency to believe that startups have a bias against older people. While ageism is alive and well, I’d argue what appears to be a bias against older teams is actually a bias against teams with experience. No one wants to invest in a team who don’t fuck around. We want teams that will find out.

One of the reasons I work with early stage startups is because their trajectory is not yet set. Every conversation has a hint of “fuck around and find out” because your vision is far away. You need to experiment, test, throw spaghetti against the wall. Pick your metaphor. The bias towards action and the bias for momentum exist in investor minds because the alternative is death.

This has the second order effect of selecting against teams with experience. It isn’t ageism. It is a bias against a certain kind of professional that knows too much. It’s not that anyone thinks experience is bad. It’s harder to fund teams with no exposure to the industry they are working in. It means that some types of experience will function as negative signaling. We think you know too much to solve the big problems. We are afraid you aren’t flexible enough to do the work of throwing out all existing assumptions.

While being an expert in a field means you have a better sense of how you will get from point A to B, it also means you have a less flexible mindset. You have seen what hasn’t worked. You have opinions about can or cannot be done. Even worse, you have an idea of how things must be done. Simply put a certain kind of battle tested, “expert in their field” persona isn’t trusted to fuck around enough.

If you are one of these founders, you have to fight against this signaling issue. Show investors your commitment to fucking around and finding out. Telegraph that all your experience and knowledge from your past work could very well be bullshit. Show us you will be committed to testing even more rigorously every hypothesis of how your roadmap will unfold. Then your experience becomes an asset.

We will trust that you have more opportunities to fuck around and find out than a less experienced founder because you plan to test what you think you know. Which is a lot! Show that no truism of your space will be held sacred. While a neophyte team will need to discover all the truths of a space to even begin to test. you will be ahead of them running test after test. Jujitsu that shit. Use the energy of your experience to show that you will bring the maximum amount of flexibility to finding new outcomes. The unbiased but experienced mind has the best chance at achieving momentum.

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Startups

Day 250 and Getting to Know You

I don’t really like musical theater (it’s the people sorry) but I’ve been humming a tune from The King and I called “Getting to Know You” as I codify my process for meeting founders and startups. It turns out Julie Andrews through Rogers and Hammerstein lyrics may be a viable strategy for finding out if someone is a fit for Chaotic.Capital. The actual play is racist, colonial nonsense but you know take art for art’s sake.

Getting to know you

Getting to feel free and easy

When I am with you

Getting to know what to say

Haven’t you noticed

Suddenly I’m bright and breezy?

Because of all the beautiful and new

Things I’m learning about you

Day by day

She’s talking about being a teacher and getting to know her pupils but it’s also maybe about falling in love, but I like the sentiment that learning “beautiful and new” things “day by day” feels bright, breezy, free and easy. That’s a good template for relationships of all kinds.

Pitching is none of those things. It’s practiced, formal, and exhausting. It may be a necessary evil for founders as you need concise and clear communications about what you are doing and why it requires capital. But I don’t think it’s the best way to get to know people. Getting to know someone should feel easy.

I like to get to know someone over the course of conversations. My preference is through asynchronous communication mediums like chat, direct message or email. There is something about the volleying back and forth of information that helps me more. I like a back and forth that is informed by revealing thought process but also context and background. I’ll chat with virtually anyone and keep my direct messages open on Twitter because I value conversation so much.

I generally don’t feel that phone or video calls are that helpful to me in getting to know someone initially. I don’t mind short 10 minute bursts. What I do dislike is the planned hour long call for an initial conversation. Rarely am I able to be emotionally and physically present for something like that if I am not already interested or invested in story.

But if we’ve had conversations through Twitter, direct message or email where I have more context and connection then it’s possible I can be present for you. But I wouldn’t recommend asking for an hour synchronous medium as your first interaction with me. I’ll do it as a favor to someone now and again but I almost always resent it.

I’d rather get to know you over time before I’m trapped in a room for an hour to put it bluntly. I promise this is for both of our benefit. You wouldn’t take someone on a two week vacation for a second date so why would you hinge your chance to work or get investment from someone by insistence on spending an hour together right off the bat. Let it simmer a bit. Give me an appetite for wanting to help you. Then you won’t be able to get me off the phone or Signal. I will be your most available investor if you take the time to show me who you are.

So go ahead. Message me. Message a bunch. Send an email. If you don’t hear from me message some more. If I’m being evasive tell me straight me. But the end goal should be that getting to know you is free and easy. And you will be able to tell if I’m excited. Don’t give up. Just keep the conversation flowing like Julie Andrew’s did.

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Emotional Work Internet Culture

Day 247 and Rooting for You

I watched a viral video of a young white American kid who claims to have quit a 100K job in order to pitch YouTube star Logan Paul for a job. It’s really hard to watch because this poor young man just utterly shits the bed on asking his favorite social celebrity to take a chance on him. He can’t even tell Logan what he is best at. He doesn’t know himself and thus cannot capitalize on his moment in the sun to show his worth. Honestly it will break your heart.

The shitty sad part of watching this kid utterly fail at self advocacy is if you are in a position of power you genuinely want to help people if they are clear about how you can do so. No one wants to say no. We all want to get to yes.

Being asked “what are you good at?” is an empathy driven open ended “get me to yes” kind of question. Logan Paul, never a celebrity I’d have previously associated with emotionally empathic, actually encourages this young fan. Even in a short clip he encourages him.

It breaks my heart a little that this kid doesn’t have anything to say for himself. Even saying something small like “ I’m the best getting groceries quickly” would have given him a chance.

I think the reason this hits me hard is that everyone has emotionally been that young man. Asked someone to help and just utterly bombed. I know I’ve taken a swing and asked powerful connected intelligent people to help me and then subsequently failed to rise to the moment. I carry those emotional failures with me. I think we all do. It’s what drives us to be better. Those moments of defeat can remake us for success. They course correct us. But only if we don’t let don’t let those failures beat us for good. We have to see the patterns that brought it into our life, accept that it’s our failure, and let it improve us.

That’s why it’s so important when you are in a position of saying no to someone to do it with as much grace as Logan Paul. I know it’s a weird sentence to type. We owe it to ourselves to there to hear them at their lowest moment with the hope may eventually become the path to their better self. Because surely someone once did that for you. That’s wisdom.

It’s hard getting a concise answer to “why you” and finding and accepting the truth of what you are truly better than anyone else is at is a lifetime of work. Being able to do it when you are young is what makes for a life that will give you satisfaction instead of disappointment.

I genuinely believe we want to help others get there. I used to hate when someone who turned down one of my pitches would say they “were rooting for me.” I thought it was dismissive. Now I choose to understand that that most people want to help you succeed.

If someone accepts time to talk to you it’s probably because human to human they would like to get to yes. I now take “we’re rooting for you” as sincere. Maybe it’s not in some cases but why not default to good intent first?

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Internet Culture Reading

Day 244 and Crypto Fiction

Science fiction has often been the proving ground for reality. Without Star Trek I doubt I’d be typing this out on my own personal tricorder (mine is called an iPhone). Imagination begets reality. Much of the internet was charted in the genre of cyberpunk long before the rest of us got online.

I think we are entering a new phase with crypto and I’d like to compile a list of foundational texts that have given us the imaginative framework for concepts like the metaverse, DAOs, and smart contracts. I believe this to be a distinct genre from cyberpunk even though classics like Snowcrash transcend both genres.

For instance I don’t think Neuromancer is a crypto novel even though it is an internet novel. I’ll have to work through my logic and categorization on that front but my instinct is that novels that explore networking and computing are not in and of themselves crypto novels. They have to include some aspect of decentralization to qualify. Further aspects like self executing logic for corporations, societal organization, peer to peer and permission-less code and other similar themes I think all fall under decentralization.

Snowcrash by Neal Stephenson – the original metaverse novel. Hiro Protagonist literally inspired Stack’s Hiro. Full disclosure my husband is the COO. Ironically he has not read the book.

Rainbow’s End by Vernor Vinge – what is basically boomer has to adjust to economic life that is organized around what are functionally DAOs with the help of his granddaughter. This grossly oversimplified plot shouldn’t be used to judge the book which is actually a singularity story.

Daemon & Freedom by Daniel Suarez – the predictive text finisher for Gmail takes over the planet by creating a smart contract. If you ever wondered what would happen if what if Grammarly becomes Putin this is for you. But I do think it is an excellent exploration of how DAO (decentralized autonomous organizations) could replace the corporation.

Attack Surface by Cory Doctorow – you could include any of the books in his Homeland universe but this one pushes home a bit harder how centralized services destroy privacy which is core to why we need peer to peer permission-less systems.

Analog by Elliot Pepper – While it is technically a thriller trilogy there is an augmented persistent metaverse that is run by an organization that transcends the corporation to be something much more. Plus it has lobbyists, self destructive energy billionaire and engineer heroes.

Acellerando by Charles Stross – it starts in the home of the corporation Amsterdam and pans out from there to include things that look like smart contracts that are in fact too smart, lobsters, shell corporations, and the eventual end logic and utility issues brought on by the logic of “always be growing.” Also snag Neptune’s Brood which deals with the monetary policy implications of faster than light travel in a galactic civilization that needs slow stores of value. Cold wallets!

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Internet Culture Startups

237 and Crypto-Optimism

As much as Silicon Valley and startup culture claim a kind of techno-optimism, in the wake of the social media partisanship, science skepticism and climate concerns, it feels hard to really dream big. People say catch phrases like “it’s time to build” but we all understand there are limits to the problems we solve in capitalism’s current markets. And no one believes the government can solve anything.

Any possibility or big dream can be clouded by its politics or cultural baggage if you let it. We yell about cancel culture but it’s really a lack of imagination. A kind of giving in to the boundaries of what is acceptable has captured the moment.

But I’m noticing a genuine mood of possibilities in crypto. A levity that believes in wide open horizons. Instead of the long horizon, crypto sees a bright one.

Maybe it’s because crypto’s proponents genuinely believe it will be possible to toss out legacy systems. Crypto is still so new the disillusionment of compromise to human nature, design dependencies or aggregate power seem far away. The problems that plague ant endeavor haven’t become inevitable. No wonder the mood is ebullient. We are genuinely happy in crypto.

You can imagine a world in which the DAO destroys the corporation. You can imagine a world in which artists are paid directly by patrons in effectively priced markets which respect their ownership. You can imagine expensive and exclusive financial products being automated away so even a small independent entity can access the best without bleeding out through a dozen service fees. Everything could still be a utopia.

And while I know it won’t it feels really great to be optimistic about something.

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Emotional Work Startups

Day 230 and Punishment

I wish I understood why we feel the need to punish ourselves sometimes. What is it about human nature that makes us abuse ourselves? Oh we deserve it. It apparently has a social purpose as well according to Psychology Today

Self-punishment tends to serve a dual purpose as it not only relieves internal feelings of guilt but impacts how others perceive us as well.

I’ve been feeling guilty. This month is the two year anniversary of me selling my last company Stowaway to a private equity firm and pursuing a medical leave to diagnose and treat my spinal condition ankylosing spondylitis. It was a happy ending, at least mostly, with the company being put into better hands than mine. But I still felt guilty.

I felt bad I didn’t live up the expectations of our biggest dreams. I felt guilty I didn’t 100x the capital for my venture investors. I felt guilty that my colleagues had dedicated so much to me and I had failed to deliver on the outcome we had dreamed of in our early days.

So punishing myself seemed like the right thing to do. I deserved to be sick. I deserve to be in pain. I deserved for the whole world to read about my experience and my failures. I deserved to be shown in public as a weak sick woman. It sounds so abusive when I write it out. Like I thought I deserved to be tortured. But maybe that’s exactly what I felt.

I am trying to unearth why I have the self limiting belief that punishment is what I deserve. As it’s more than just the circumstance of selling a startup and not seeing the results I wanted. It’s got to be deeper than the rationalizations I’ve given.

I’ve practice family systems therapy. The basic premise is that our childhood informs how we react as adults. And by healing the rough patch’s or even traumas of those times we can live the life we choose. For me I felt abandoned as a child. I wanted my father in particular to be emotionally available. But it just wasn’t to be. But I held on to the idea that I must have deserved to be abandoned. But of course it had nothing to do with what I did or did not deserve. It wasn’t about me at all.

Now I remember that I am a capable, brilliant and above all reliable person who needs to accept what I can be and not be bound by what I learned in failure. Finding that and turning it into your superpower is where the real success comes from.

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Aesthetics Internet Culture Startups

Day 213 and Kobayashi Maru

I don’t believe in the no-win scenario

Captain Kirk

If you cannot win by playing by the rules, then change the rules. If you are nice Iowa farmboy named James you will probably get away with it. Or a cartoon character named Calvin with a stuffed tiger named Hobbes. There is no cheating in Calvinball because the rules are constantly changing.

I’ve been thinking a lot about shitposting this past year as it becomes a kind of social sport in venture capital and startup Twitter. I’m a big fan of the shitpost as I think making elaborate “jokes but not quite jokes” can be an exercise in vulnerability and honesty.

But who gets to be honest and what rules will be broken if the wrong person says the true thing is quite telling. I have a medical procedure that is going to take a lot out of me this week so I’ve been resting at home in preparation. This has meant I’ve watched a lot of television. I’ve been binge watching Downton Abby the period drama about Edwardian Aristocrats coping with changing social standards as modernity bears down on them. It’s a drama about “manners” which please lots of agonizing over who and what is right and proper. The class structures are so codified they are literally written down. No seriously they kept books about peerages! Check out Burke’s. Fucking wild.

It all seems a bit ludicrous as an American but I’ve got to imagine social institutions I consider completely normal will look utterly baffling in a hundred years too. And much of the way those social mores change is when someone decides that playing by the rules is a no-win scenario. Sometimes the game is so codified that no one but people who have been trained and advantaged their entire life can be winners. When that happens the only way anyone else can win is to change the rules.

Or as Spock might have said to Kirk. “You cheated.” But is it cheating when it’s a no win-scenario? If by changing the parameters the game you open up entirely new possibilities maybe it’s a good thing. Sure, Star Trek does an excellent job of showing us the emotional and moral limits of never having to face failure and it’s consequences. But what if without rejecting the premise of the Kobayashi Maru you could have never known success or change?

I think shitposting might be a bit of social Calvinball or some social media variant of the the Star Fleet ethics test. People with some power use it to great effect. But a lot of people with some talent and an eye towards improving their social position leverage shitposting. They change the rules of what can be said. They make a game of truth telling and shift the rules of the game. This isn’t a finished theory by any means but as I’m determined to slowly think my way through a grand unified theory of shitposting you can expect a lot of notes and works in progress on the topic here.

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Internet Culture

Day 212 and Notes for A Unified Theory of Shitposting

Yesterday I was fucking around on Twitter, as I am prone to doing. I made a barely sit-com worthy joke about divorced guy energy.

You ever notice how women thrive in the aftermath of divorce but men implode? Why is that?

My husband Alex replied with a searing burn “don’t worry, I’ll be fine” response and we were off to the races with all our mutuals dunking. I was howling with laughter. The two of us were trading zingers and watching the DMs roll in from friends.

Obviously the undercurrent of any thread on social media got dark very fast. So quickly I ended up putting out resources for men who were struggling in the replies. The amount of pain on display was enough to make you want to donate to the first domestic abuse charity I could find.

So why is it that I can shitpost about a topic and come away unscathed, indeed it was a fun and entertaining night for both myself and Alex, but others melted down? I think it might be about class and social signaling. It takes a lot of social capital to shitpost. And those that shitpost on the most socially contentious topics are demonstrating their social capacity to discuss whatever they want without consequences. I can shitpost because I’ve got enough social capital to do so.

One theory I’ve got is that shitposting is a backlash to Ted Talks, super serious reverential coverage in glossy business magazines, and the proliferation of HBS style “business” books. We’ve had an saturation in performative professionalism.

Once it became unclear that every self seriousness biography or magazine puff piece was placed by professionals to make their clients look like geniuses (visible effort undermines certain kinds of status) the savvy social seeker knew they needed a more authentic way to telegraph in-group power. The next logical step was demonstrating that you were so smart, so powerful and so connected you didn’t even need to demonstrate it. Hence the shitpost.

The weirdest part of “shitposting” being an actual status symbol in venture capital is that a couple of billionaires are going to see me and Alex making jokes about divorced guy energy and this will only increase our status. Which is ludicrous on its face ans yet absolutely true.

This isn’t even a flex on my part (though it obviously is a flex) as it is now accepted that having a following for saying whatever you like gives you a leg up in startups. A friend likened it to “dressing down” or the practice of wearing causal clothing even in formal settings. It shows you are so powerful and wealthy you don’t need to give a fuck about manners. Shitposting on Twitter is like wearing ripped jeans at the country club.

I want to explore this topic in more depth so this post is just some sketch notes. But I wanted to get it down and organized so I hope it’s alright to have some half baked ideas. It’s my blog so I figure it’s fine b

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Finance Startups

Day 202 and Show Me Anything

I’m lucky to see work from founders at the very earliest stages. If you have a problem you are solving for chaotic world I’m generally interested in seeing it even if it’s just in the idea phase. But you have to show me you’ve got a plan to build a product. Any product is fine. Just show me something! Show me how you have the capacity to build even if you suck at it.

Bobby Goodlatte captured some of the sentiment I feel on the subject well with this exasperated Tweet.

What’s a “builder”? Show me something. Anything. Just show me one pixel you’ve created. That’s what a builder is. That’s why PM’s don’t qualify.

Sometimes it can feel hard to build something, anything, when you are very experienced. This is a problem I’ve seen across all kinds of impressive people. Academics, government folks and higher end finance folks, former c-suite executives. They know what good looks like so anything they can physically make with their own two hands will all look like crap.

I’d even go so far as to suggest there is an inverse relationship between how much you obfuscate your lack of existing product and your credentials. There are other corollaries on that basic theme. How comprehensible your product is right now is inversely related to how extensive your service layer is at the moment.

I see a lot of brilliant, extremely credentialed people solving big problems, but because making money is important they will pitch what amount to service companies without an existing product. But they will use extensive jargon and hand waving visionary opportunities to hide the fact that there isn’t any product layer yet. Which is weird because like eventually I’ll find out right? You wouldn’t want to trick your investors on the state of play.

I’d encourage you to stop trying to hide that fact. Don’t be embarrassed that you can’t make things to your standards. None of us can. New things always look like shit. Just own up to that reality and you will find more help from folks who will want to help make it better. Stop showing me CAGR and TAM and possibilities as a way of hiding that you haven’t built a product yet. It’s ok. You don’t need to have built something great yet.

Admit it. Show me some wireframes and a roadmap. I’ll take that way more seriously. In fact, I’ll probably overweight you showing me exactly what you do have and how you plan to use funds to improve it. That’s how much startup people value just building the damn thing.