Tag: Venture Capital

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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

Categories
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.

Categories
Startups

Day 190 and Neutrality

One of the more influential pieces of art on my worldview is the science fiction comedy Men in Black. Yes you read that right. My philosophy is underpinned by a speech by Tommy Lee Jones.

1500 years ago everybody knew the Earth was the center of the Universe. 500 years ago everybody knew the Earth was flat and 15 minutes ago you knew people were alone on this planet. Imagine what you’ll know tomorrow

I don’t really know shit. I know enough to know I don’t know shit. My mother had a favorite bumper sticker “ask your teenager while they still know everything” which at the time as a teen I found a bit insulting and now as an adult think was quite astute. The more I know the less I know for sure.

Because I’ve slowly come to realize that knowing can be a crap shoot I keep odd company. Arguably bad company. I follow some truly outrageous people on Twitter. I follow hard right partisans and tankie left wing socialists. I follow folks with deep convictions on the irredeemable evils of technology and the most ebullient techno-optimists. It’s hard to talk me into not keeping an eye on all view points. Sure I think some folks are dead wrong but how do I know I’m not one of them?

Not knowing things for certain as saved my life. Medicine has a tendency to interpret data as absolute. Biometric markers and test results can for some doctors have as much authority as a papal decree. Anyone who has been told “well your test results are normal” while still feeling like absolute shit will know how frustrating this can be. Plenty of data points look absolutely normal before a system cascades into failure.

We don’t know as much as we need to believe we know. Our craving for certainty as humans is a significant weakness. The venture capitalist who insists that some metric will determine a crucial outcome is a favorite trope of mine. As if favorable CAC/LTV ratio functions as a warding spell or an attractive margin structure offers protection against a changing consumer preferences. Knowledge isn’t magic. Superstition can just as easily apply to P&Ls as poltergeists.

I find it best to remind myself to take a neutral when approaching entrepreneurs. Maybe I don’t know. Maybe everything I’ve ever known was particular to my circumstances, bias, education quirks or just plain randomness. Maybe one small insight will shift the grounds underneath me and reveal entirely new frameworks for interpreting reality. The unknown unknowns have a habit of springing themselves when you least expect.

It’s often tempting to throw opposing viewpoints into buckets that are easy to dismiss. Venture investors are notorious for this. We dismiss folks for any error we spot. We deride their data. We applaud ourselves for spotting cracks in their plans. Resist this tendency. We must always retain the neutrality of perspective that allows us to change our mental models. What we know to be true might be a lie. We may lack a key piece of context that would unlock a cascade of understanding that changes our entire perspective.

This is why the adage “strong beliefs weakly held” can be so key to success. Changing our minds is a strength. It’s hard to admit to ourselves we’ve gotten something wrong especially if we sunk a lot of time, money and reputation into it. But would you rather be right or successful? Feeling superior can be a delight but not if it gets in the way of what we want in life.

Categories
Startups

Day 182 and Operating Capital

Popular culture portrays Silicon Valley and the startup space as one where capital is king. But it’s not the kind of capital you might be envisioning. Money (literal capital) is less of a driver of success than your social capital. And a specific type of social capital is overlooked.

The people with the most social capital aren’t necessarily founders or venture capitalists. It’s the career startup operator that has a good reputation that matters. They have a type of social capital I call operating capital.

There is a reason the team slide matters in a pitch. Who you know and how much they like, respect and trust you has a lot more to do with what deals get done. Part of this is related to luck and timing. The most talented people aren’t always the ones that have big hits. In fact, we correlate failure more strongly to overall credibility.

This makes spotting who has the most status in startups tricky. In industries like finance, money keeps the score. In consumer packaged goods, it’s what brand team you were on. In startups, the score is tricky to quantify value. We’ve developed an elaborate system of social capital signaling that determines who is considered valuable. But within that social capital status in-group you will find that the executive team layer has some of the most pull as founders and board members build working trust with them over years.

Because we value operators as high social status individuals we build our social status signifiers around your proven capacity to problem solve. How you solve problems can make or break a startup.

And we need all kinds of thinking. We need system thinking, (ops), a knack for keeping talent motivated HR), an ability to drive excitement and warp reality (marketing and PR) and obviously you have to be able to make shit (product and engineering). The people with these capabilities are the ones that accrue the most operating capital. Find those high status people and you will never be far from a startup that may have a shot at the big time.

Categories
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.

Categories
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.

Categories
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.

Categories
Finance

Day 163 and Favors

Some professional arenas are driven by the favor trading of social capital.

I’ve got a gut sense that this is true on the two poles of commodity products and services. The middle ground has a lot more nuance and is thus less susceptible to favor trading, as it’s clear what drives price and value of service. With complete commodities (identical replacement value) and the non-fungible (not interchangeable or replaceable) there are not simple price or value anchors. This makes it more likely your purchase or choice will be driven by the perception of social capital. We will do favors for those with higher status or by the recommendation of those we trust.

Interchangeable commodity products trade on price, which means favors from across the ecosystem act as the grease in otherwise equivalent deals. Think suppliers of everything from lumber to textiles. If the price is the same maybe you buy from someone you like who took you out to dinner. Or you buy because that person has a good reputation in the community so you use the person your neighbor recommended. This seems intuitively true of commodity services like accounting, plumbing or roofing. Within certain bounds of quality, a 2×4 or a roofing bid should fall into the same bucket so it’s ok to pick whoever feels best. That’s why it’s susceptible to favors and social capital exchange.

On the other end, extremely differentiated non commodity products are equally prone to being tipped by favors. Think professional services like public relations that are very hard to compare. A publicist with favors to trade gets their clients the best coverage. A reporter who has a lot of sources can trade them in to get a quote for a story. Venture capital is one of the least commodified types of capital, a founder will pick one firm over another not just based on the price of a term sheet but whether others recommend them. Reputation matters a lot. Social capital is what gets a deal done, a nudge to consider someone will push you into a cap table.

Not convinced? Think about a product that exists in the middle like clothing from a brand you know but isn’t connected to you in any other way. This is the least susceptible to favor trading or the pressures of social capital.

We can intuit a dress made from quality fabrics and a recognizable brand has a set cost because the brand of the designer is not interchangeable (maybe with others in their category but Prada isn’t the same as Old Navy) and the cost of the fabric is transparent. A silk blouse can’t ever get too cheap on a one off basis. Both the brand and the fabrics set the bounds of the prices.

I didn’t really have a point in writing this other than being curious about what impacts how we pick what to purchase and what sets the bounds of our pricing. We are in a narrative cycle around inflation and work shortages which is having an impact on how willingness to to spend or hire.

So be careful if something seems too expensive but comes highly recommended. Be equally wary if something is particularly cheap even if a friend likes it. Look for the sweet spot of pricing and reputation that is based on market price beyond your in-group.

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.