Marvin’s Best Weekly Reads July 26, 2020
Sometimes, we are so attached to our way of life that we turn down a wonderful opportunity, because we don't know what to do with it --Paul Coehlo
1. Awesome & old profile of DE Shaw: one of the first and best quant hedge funds. Also Jeff Bezos worked there and it’s where he came up with the idea.
DE Shaw, the First Great Quant Hedge Fund
2. Think China is going to be a dominant global player? Think again. Worth a read here as it’s contrary to the popular view out there.
3. “After attending and hosting virtual events, it’s clear to me they will continue to be an addition to the marketer’s quiver. And if you haven’t yet explored them at your startup, I think you should reconsider.”
The Unforeseen Benefits of Online Events by @ttunguz
4. This is a monster read by Ray Dalio but important to understand macroeconomics and where the US Dollar is going.
5. “Everyone is all in a tizzy about day traders and Robinhood and Dave Portnoy. “Ooooh, they’re going to have such a hangover when the bubble pops. Ooooh, they don’t understand how investing works.”
Pffft. They’ll be fine.
The investors facing a hangover are small family offices, plied with endless offerings of fee-heavy SPVs and SPACs by multi-billion dollar asset managers. They’re the ones overserved by Wall Street today."
https://www.epsilontheory.com/overserved/?utm_campaign=website
6. “When I ask people how their lives could be improved by removing difficulties, I am always struck by two things. One is, how many of these problems are actually people. The second amazing thing is that the list of monster problems is usually very short. Remove these frustrations, and life becomes a lot sweeter. Use the 80/20 principle to identify the few things that cause nearly all the problems. Then remove the problems."
"Be optimistic. This is where believing that life is difficult can lead you astray. Sure, life is difficult, but the difficulties can always be overcome. There is always a way. It’s just a question of locating it."
ARE LIFE & BUSINESS DIFFICULT?
7. “The presumption that America — once the dominant player in global technology — would have new competition building products of and for rising markets on their own terms was made clear in a rising China. And, of course, as millions of miles of travel since has shown me and anyone willing to look around them — mini “China’s” were rising everywhere. Ask Uber if merely showing up in a market meant they would win it as was once often the case for American tech companies, and their exit from South East Asia with an investment in the largest local competition says a lot.
Thus my one condition for giving such a speech is that it cannot talk about where the next Silicon Valley will come from. While I knew there were great lessons to be learned there —the behavior, mind sent and seeding environment of the Valley remains astounding — it was clear to me that new markets were going to rise on their own locally sensitive terms and those terms would, in fact, unleash a new global approach as billions of new consumers were holding the very means to transact for the first item."
8. "Of course, there’s a more directly competitive aspect to venture capital because it’s a zero-sum game. You have to win, and earn your place in a competitive opportunity. It’s collaborative too, though, and that’s what I love most. I love working with a range of people in the ecosystem. That’s part of the reason I founded High Output as an angel-investing/coaching firm, rather than a traditional fund. It allows me to do what I love, but I don’t have to fight against all these other seed funds out there to win a deal. I can work with them."
https://thegeneralist.substack.com/p/the-miss-steve-schlafman-on-snagging
9. Super insightful write up. I’m not normally a fan of the “velvet rope strategy” but when it works it really works.
The Value of a Velvet Rope: Effects of Hype and Exclusivity on Launch Strategies
10. I read anything with Tim Ferriss: a great interview here.
"The 4-Hour Work Week is—based on the title, understandably—often misunderstood. The objective was to provide a toolkit for maximizing per-hour output. It's not necessarily about working four hours a week. You could choose two hours a week, one hour a week, or 80 hours a week.
But the reason that book found such a toehold in Silicon Valley is because it was focused on evaluating different currencies—money, time, mobility—and how you can pull levers to change these variables to maximize per-hour output. That toolkit was very much time- and income-focused."
Because it doesn't matter how much money you have, doesn't matter how effective or efficient you are. It doesn't matter what types of fancy toys you collect. It doesn't matter how hot your significant other is, if your inner world—your internal monologue or dialogue—is that of anger or despair or frustration or sadness the majority of the time.
Almost none of these other things matter very much."
From Productivity to Psychedelics: Tim Ferriss Has Changed His Mind About Success
11. "Kirkland’s success defies our intuition and experience. Shouldn’t lower prices lead to lower quality products? How can they offer rock-bottom prices but still have some of the best products around?
The answer is this: they get the best manufacturers in the world — who already have products on Costco shelves — to make Kirkland products. Yeah, you read that right. While customers might not know it, Kirkland products are often made by the same manufacturers who make the branded products that sit next to them on the shelves.
And not only that, but according to a Reddit user who worked at a Costco supplier, Kirkland products have to be at least 1% better than the equivalent branded products (on some metric of their choosing). Costco forces manufacturers to compete with a better version of themselves.
But if Costco is pitting brands against themselves, why do the brands put up with it? The short answer is that they want to. Costco is one of the largest sales channels in the world and brands can still profitably sell their products under the Kirkland brand."
Why Most Celebrities (Hollywood, Professional Sports, Music Stars) Suck as Startup Investors
Clearly I am generalizing. The examples of Ashton Kutcher, Joe Montana, Troy Carter, Nas, Serena Williams & various folks from the Golden State Warriors are effective counterpoints. All are super savvy individuals who have also built ties and have incredible mentors from Silicon Valley. Each one is an exemplar in tech investing and probably have better portfolio companies than me. But I would argue these are the exceptions.
If you look at the majority of celebrity investors, due to the mindset of where they come from, it’s almost always short term & opportunistic (ahem Chainsmokers & Manny Pacquiao). This is contrary to the mindset needed for tech investing where the time horizon could be up to 10 years.
Not a surprise when they come from industries where fame & influence tends to be short. Perishable might be a better word. That’s why it’s common when you see stars hit the big time, they start to cash in on this. All of sudden you see them doing all these random sponsorship or licensing deals with all types of random products. This is called the “great cash grab” to monetize as much as you can while you can. Fame & Influence is fleeting in that world, so this is a very logical behavior. This is not a value judgement, but an observation. If I were in their shoes, I would do the exact same thing.
Additionally, a big driver for this movement into Tech is that it is (or was) very hot. Nothing motivates someone more than seeing their peers make money in something. Also its sign of coolness, so why not. Hence the dabbling.
For the record, it’s not a bad thing to take a celebrity’s money as a startup. It actually makes A TON of sense if you are running a Media startup, Direct to Consumer (DTC) or Consumer brand focussed biz or something related to Hollywood, Sports or Music. But outside of this, not sure they can add a lot of value to other sector startups.
So if you do take money from them, just make sure you manage expectations clearly with them. They are dabblers and may not understand how long it will take to get liquidity (if any).
Manage your own expectations as founder on what these celebrities will be able to contribute. They all have busy careers in other realms, so your startup is most likely not a priority. The famous poet Ehsan Sehgal said: “An opportunist runs away and disappears if it fails it’s targeted opportunity. ”
Just remember these folks are tourists, not settlers in our world here, so word to the wise :)
PS: Most Investors, Angels and VCs suck too. It’s called Pareto’s Law. But they underperform for a multitude of other reasons which go beyond a short blog post.
Why Most Founders Don’t Take Good Advice
Most advice is not good. I admit that. Most investors don’t know what they are talking about. Most founders give very industry or stage specific advice that is out of context.
But due to the depth of knowledge and experience here in Silicon Valley, there are many high quality people who do give great advice. Credible people giving credible advice. Yet most founders still tend not to follow good advice given by credible people. People who usually only want the best for their mentees.
I spent 6 years running one of the top global accelerators in the world, running 12 programs with over 370+ founders. I used to get really annoyed when we would share best practices in fundraising, or customer acquisition or hiring and firing and have it all be completely ignored.
But I have come to accept that this will always be the case. My hypothesis? Even if your advice is correct, there are good reasons why they will not take it.
Here is Why:
1) Some things they can only learn the hard way ie. Experiential Learning.
The most common example is Hire Slow, Fire Fast. Almost no one follows this advice because if you have not gone through this yourself it’s just so esoteric or theoretical.
2) The advice is “Cognitively Dissonant” that they don’t understand it. Or more likely, do not want to understand it.
This occurs often because it breaks their worldview and it’s too painful or just does not fit with what they believe.
3) They think they are Exception to the Rule.
The journey of a founder is VERY hard, thus it’s highly irrational. You need to have a little bit of naivety and/or delusion to be a founder, otherwise you would never start. This leads you to think you are unique and different so that the best practices don’t apply to you.
But in all 3 cases, the market aka Reality ALWAYS educates you quickly & painfully.
This is no different than when growing up and you used to ignore your parents advice because you think you know better. It’s something that can only be learned with time and experience. It reminds me of the Josh Billings joke:
‘When I was a boy of 14, my father was so ignorant, I could hardly stand to have the old man around. But when I got to be twenty-one, I was astonished at how much the old man had learned in seven years.”
As an advisor, mentor or investor, all you can do is be there to help them up if or when it goes wrong. And in my case, also to say “I told you so!” ;)
Marvin’s Best Weekly Reads July 20, 2020
“The single best productivity hack - that everyone should aspire to -don't keep a schedule.” --Naval Ravikant
1. "So why does this matter? Companies with network effects that don’t look like network effects are diamonds in the rough. Because their networks are hard to measure, they can often be under-appreciated in the short run and disproportionately strong in the long run.
In the same way that the best startup ideas are good ideas that initially sound like really bad ideas — because the obviously good ideas are both picked over and hyper-competitive — some of the strongest network effects companies end up being strong precisely because they initially don’t seem to have strong network effects."
https://a16z.com/2019/07/29/hidden-networks-effects/
2. "Startup founders and investors love disruption theory because it gives them a playbook: find an incumbent who has made their product too expensive or complicated, then make a version that’s simpler and cheaper, but better along some new dimension. Then, launch to a previously ignored audience, and improve the experience over time.
This isn’t necessarily a bad way to go! But, increasingly, the smartest thinkers in modern strategy are questioning whether the playbook always works."
https://divinations.substack.com/p/disrupting-disruption
3. An interesting new phenomenon happening in Silicon Valley. Venture Capital Funds being unbundled by big name Operators & Founders. Watch this space.
The Rise of the Solo Capitalists
4. "Going from Coordinator → Channel Manager → Sr Channel Manager, you develop more channel expertise and better execution capabilities. You become great at optimizing KPIs within the constraints of your channel. But focusing on the things that make you great as an individual contributor will actually trip you up as a Team Leader. Psychologically, it's incredibly difficult to get out of the habits that initially made you successful."
Crossing the Canyon: Leading Your First Marketing Team — Reforge
5. Open AI’s GPT3 is a big deal. A very good write up. I’m still thinking through the implications.
OpenAI's GPT-3 may be the biggest thing since bitcoin
6. A good call to action here.
"We aren’t used to this sort of cognitive challenge. Software is so democratized today, we forget just how blisteringly difficult almost all other facets of human endeavor are to even start. A middle schooler can build and deploy a web service scalable to millions of people with some lines of code (learned from easily & widely accessible resources on the internet) & some basic cloud infrastructure tools that are designed to onboard new users expeditiously.
Try that with rocketry. Or with pharma. Or with autonomous vehicles. Or any of the interesting new frontiers with green fields that are just sitting there waiting for the taking.”
The dual PhD problem of today's startups
7. "Nespresso triumphed by selling itself as a sophisticated component of an elite, globalised lifestyle. Wherever you were in the world, you could be a Nespresso person, just as you could wear Nike trainers or use American Express. Now, as that lifestyle looks increasingly bankrupt, it is learning to be just another coffee company."
Culture is the Company and the Founder is the Culture
“It’s an easy prediction to make—that Jeff Bezos will do what he has always done. He will attempt to move faster, work his employees harder, make bolder bets, and pursue both big inventions and small ones, all to achieve his grand vision for Amazon—that it be not just an everything store, but ultimately an everything company.” --Brad Stone, “The Everything Store” book
As I write in 2020, Amazon is the dominant player in the Retail, Cloud Computing and Advertising Spaces with market share that would satiate a monopolist. Jeff Bezos is a relentless, customer centric entrepreneur and leader who has built a monster execution machine in Amazon.com that has crushed all competition. No surprise that the leadership team and culture is a direct reflection of himself.
You don’t need to look far for other examples. Other major dominant companies like Walmart under Sam Walton in its past, Microsoft under Gates, Apple under Jobs, Facebook under Zuckerberg, Tesla & SpaceX under Musk. Facebook is ruthless, strategic and focussed. Gates was prepared to crush all competitors and did not play well with others (a very long list of destroyed companies, most famous was Netscape).
Companies end up adopting the style and thinking and behavior of their founder. Stated earlier, people at Amazon are relentless, efficient and extremely customer centric. Microsoft under Bill Gates was aggressive, direct and also extremely ruthless. Apple was design focused (and still is). People at Facebook are focused about driving big impact and are ruthless and strategic, with zero shame of copying competitor features and products. One simple example is Instagram Stories, hmmm….that looks kind of similar to Snapchat. :)
Culture is a scaling tool. Culture repels certain individuals and attracts others. The environment and the people you are around drives behavior. New employees naturally learn consciously and subconsciously by taking cues from their surroundings on what is accepted, rewarded and what is not.
This observation allows us to extract about how important the founder with an owner mentality is in driving the culture. And how almost always when the founder leaves and a professional manager takes over we see a slow decline of dynamism in the company. Many professional managers “optimize short term gains by squandering long term opportunities”. (Steve Blank)
This is a the business-y way of saying “The fish rots from the head first.”
There are obviously rare exceptions like in the MSFT situation with Satya Nardella who effected one of the best turnarounds in business history when he took over in 2014 (How Satya Nadella and the Cloud Turned Microsoft Around) or Shatanu Narayen of Adobe ( who took Adobes market valuation from $20B to $220B by positioning the company toward the Cloud Adobe's CEO on how the company is posting record results amid economic chaos). But the counterpoint is Microsoft after Ballmer took over from gates where revenue grew massively but they lost market share and missed many opportunities like on the internet, cloud computing and mobile.
The Implications here are rife for investors and employees. If culture is a key driver of company performance, then founder leaders are a key driver of the culture. It’s important to watch for signals for how management transitions will affect the culture of great companies.
As famous GE CEO Jack Welch Says, “The Soft Stuff is the Hard Stuff.”
The Magical Power of Your Environment and Who You Surround Yourself With
There is a very common saying here in Silicon Valley: “You are the Average of 5 people you spend most time with.”
I was lucky to end up at Alibris.com, then Yahoo! & 500 Startups at very specific times in their growth. For me it was just like being at Microsoft in the 90s, or eBay 2000-2005, Google from 2003-2008, Or Facebook during 2008-2013. Magical times of growth when there was a critical mass of amazing people who worked there. It also helped that massive fortunes were made by people who worked there during that time. Getting equity really does matter :)
The existence of the Paypal Mafia & other Mafias (Facebook, Yahoo!, AirBnB, Uber etc) show the power of these tribes. Opportunities for new jobs, business partnerships and investment all come from these types of power networks. This is very similar to what happens with top University alumnus.
If you optimize for learning, the best way to do so is from being around other great people. I was listening to an excellent podcast interview between David Perell & Daniel Gross where this came up. The question was:
“Environment Matters and there are 4 ways to build these great environments:
Digital environment: Asymmetrically through books & podcasts
Digital Community Groups: via Telegram group, Reddit Group etc.
Physically locating near a small group of people who have a great mindset
Move to city full of great people
If you want to penetrate an industry go to the centre of the network. It’s why you join certain companies or move to certain cities. So if you are into Hedge funds or Investment Banking, it only makes sense to go to New York or London. If Media is your thing, Los Angeles, New York & London is the center of things. If you are in the Tech Industry, it’s Silicon Valley/San Francisco. But if Fashion is your thing, San Francisco is pretty awful, but New York, London, Paris or Milan are much better places for you.
It’s why I moved to San Francisco back in 1999. To meet, compete and collaborate with amazing & interesting people.
If you want to become better, be thoughtful about your environment and surround yourself with people smarter and better than you are. You always want to be the dumbest person in the room.
If you do this, your Network really does become your Net Worth!
Lessons from the “Forrest Gump” of Silicon Valley
How Do You Build a (Relatively) Successful & Varied Career in the Tech Biz?
I get asked this question often by younger folks all across the world, particularly in the last 6-8 years as a “Gray Hair” as 40 something in San Francisco. I firmly believe that the Future of Work and the world is becoming more like the “tech industry” in Silicon Valley than less. Whether you believe that is a good thing or not but it’s happening.
I do NOT feel like i’ve been particularly successful but yet i do feel i’ve had a very interesting and varied career. First as an early employee (Number 18) at a startup that ended up raising 64M usd, then spending 10.5 years at Yahoo! Inc in its glory days, followed by a 6-year stint as a Partner at venture capitalist fund 500 Startups. Varied careers like mine seem to be the norm here in the San Francisco Bay Area which is what makes this place so interesting (and scary competitive).
During this time I've pulled out some lessons and principles that I hope will be instructive and helpful for folks starting off, thinking about, or restarting their careers.
1. Try Lots of Things:
The first thing you learn about success from Silicon Valley is the velocity & dynamism of the place. The secret is taking many swings at bat & making a lot of bets. There is a reason so many of the top investors and Startup founders are very big aficionados of Poker.
You see lots of people jumping from startups to big tech companies back to startups. For example, the average tenure of an employee at a big tech co (Uber, FB, Dropbox, Tesla, Square, Twitter, Netflix) is about 2 years. The days of spending 20 years at a company are over. I recommend trying a lot of things to see what you like, where you can thrive culturally and figure out what you are good at (that the market values).
My caveat though is not to jump around every year though, that is just not long enough to see the results of your work at a place.
2. Pick a Growth Company (or 2):
This one is tougher to figure out and why i earned the moniker of “Forrest Gump.” But you should pay attention anytime you see a company on a growth trajectory. Or if you hear the excitement of customers & employees or smart friends talking about it. Present day examples of these high growth companies that come to mind would be Stripe, Fast.co, Superhuman, Epic Games, Notion or Webflow. Or Facebook 8 years ago.
And of course, hopefully you are personally excited by their mission or what they are doing. I found that even if the company does not work out, you meet a lot of very smart people.
3. Give Before You Get. “Paying it Forward Culture:”
The top people are almost always generous with their time, energy and advice. Give before you take. (Don’t be an arrogant A--hole who thinks they are better than anyone else). I am not always successful here but i do legitimately try to do this as often as i can.
This is how I ended up at 500 Startups. I was a volunteer mentor for their core accelerator program for over a year and half. I didn't do it because I thought i was going to get a job. Being a Venture Capitalist was very far from my mind at that time (i always thought i would go back to being an operator type COO or CRO at Series A+ company) . I did it because it was fun, I had the time and I wanted to give back. I ended up spending almost 15+ hours a week with their startups. I guess they felt guilty and that was probably why they asked me to join and help start their San Francisco office in 2014. (Thank you Dave!)
Always try to be helpful to people below and above you. Morally & cultural this is what makes Silicon Valley work. But the pragmatic reason is that in an environment as dynamic as the technology business, what is a startup today could be a dominant company tomorrow. A poor founder today, is a billionaire tomorrow. It does happen so you never write anyone off here. No where else in the world do we love a comeback story quite like in Silicon Valley.
4. Think About Your Reputation & Practice Long Term Thinking:
As Warren Buffett says “It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you'll do things differently.”
Everyone talks about it but in my 20+ years here in Silicon Valley, I am continually surprised by the bad behavior of people and extremely short term thinking that happens. If you are good at what you do, have a reputation for doing right by people whether you are a company or person. This will precede you wherever you go or whatever you do in Silicon Valley.
5. Stress Importance of Relationships & Network (and Power of the Back Channel):
What makes Silicon Valley as well as any other industry work is the tight relationships and networks that span geographies. School and company alumni operate on this. There is the most famous Paypal Mafia but people forget about the very extensive ex-Yahoo!, ex-Facebook, Xoogler, or ex-Ebay or ex-AirBnB or ex-Uber Mafia that spans across Silicon Valley.
This is how you get new opportunities and get referrals and feedback on individuals. This is also how you find out about people's true reputations during the inevitable reference check.
6. Optimize Learning over Earning (ie. Chase Curiosity and not Monetization):
Be a Missionary, not a Mercenary. Mercenaries don’t last in the long run in a place like Silicon Valley. What I optimized for every role I chose was “would I learn in this position and company?” Would I be surrounded by super smart people who would raise my standards?
“You are the average of the 5 people you spend the most time with.” This has always worked for me.
Of course there are situations when you do need to think of the money. But for me, In those few occasions when I did choose things mainly for the money, it never worked out well. Probably either because I was not fully interested nor was I fully committed.
7. Stay Longer and Be Prepared to WORK A LOT:
I see so many people jumping around every year to a new company or new opportunity. I know I mentioned taking a lot of bets but you also have to spend at least 2-3 years at a place as this is how long it takes to 1) make an impact on the business
2) seeing the results of what you are working on. This is how you learn the trade.
I should also note that while I worked at Yahoo! for 10.5 years, I had 5 different roles across different groups while there. So it was varied and did not feel stale.
Sorry to disappoint you but you cannot “4 Hour Work Week” this, especially if you are early in your career (or if you want to achieve excellence in a new role or something completely new to you). When I was at Yahoo! and 500 Startups, I’d work 80-100 hours a week and it did not feel like work. I thoroughly enjoyed the work so much, it was almost every night Monday to Thursday that I would get a call from my wife after 900 pm asking me when I was coming home. (SORRY :() & i should note i missed a lot of my young daughters life which is the only deep regret i have in my life today).
8. Invest in Yourself:
I was so obsessed with getting better and learning about how to do the job, I'd spend time in the evening and weekends reading and watching videos, talking with friends who were investors or renowned operators and learn from them. At Yahoo! this was driven by insecurity and fear of losing my job in the aftermath of the Dotcom Bust. I also felt very behind everyone around me there. They were smarter, had more relevant experience and were more credentialed than I was (boy so MANY Stanford MBAs at Yahoo!). I definitely have some level of OCD which helps here. But I was legitimately interested in the subjects, and over time they became an obsession for me.
When I joined 500 Startups in 2014, i found some good mentors outside of the Firm who were extremely helpful to me (thank you Mike & Tim). I read and watched everything on the art of Venture Capital and how it worked. I was also lucky to be at 500 during that time as it gave me many opportunities to practice investing (i ended up doing over 400 seed deals when i was there which i will be eternally grateful about).
9. BE Interesting (and be Opinionated & Vocal):
In my sabbatical aka “Fallow Years” between Yahoo! & 500 Startups, i met a lot of interesting people in Silicon Valley after being cocooned in the comfortable world of Yahoo! digital media/advertising. It’s relatively easy to get first meetings but hard to get follow up ones. I did this because i had 1) nothing to sell 2) i was not looking for a new job 3) nor was i trying to raise money. But I had built a solid experience, a decent reputation and spoke my mind as I saw things whether it was popular or not. This is very much valued by most senior accomplished people whether they were senior VCs or Business Execs or Startup Gods where people (especially in California) do not speak their mind for fear of offending anyone. So I always got invited back. It does pay to “Speak Truth to the Power.”
I hope the lessons I shared will be helpful for anyone who is interested in surviving and thriving here in Silicon Valley. I cannot guarantee you will get “Rich” following these principles but i do think they will help you build a really fun and impactful career in Tech.
I consider myself very lucky, having built a varied career that has challenged me intellectually, put me in the circle of so many accomplished individuals at the top of their game and given me opportunities to travel across the world. I’ve had such a fulfilling and fun time over the last 21+ years here. That is why I have no problems claiming the title “Forrest Gump of Silicon Valley.”
“Fast Money” versus “Dumb Money” versus “Smart Money”
There has been a FLOOD of new money coming into Silicon Valley especially since 2015.
I’d classify “Fast Money” as Hedge Funds, Private Equity Funds & big Mutual Funds. But my guess is that with this downturn alot of these guys will disappear (and yes its usually guys sadly). These folks in previous times were also called HOT Money, flooding in when the market got heated & flooding out (literally) when it starts to deflate. I saw alot of this with a front row view while living in Taiwan during the Asian Economic crisis in 1998. Ask the Thais, South Koreans, Malaysians, Indonesians what happened then. I also am not talking about Coatue, Altimeter or Tiger Global. But i would definitely include many of the east coast firms who came into tech the last 3 years.
I really should point out that this is nothing close to “Dumb Money”. “Fast Money” are super sophisticated investors who just operate on a much shorter timeline than Venture Capitalists due to the nature of their business and with their returns being measured in quarters, not years like in VC. They are very quick to write off perceived losses & move on to the next opportunity. This is a strength in their world but different in tech where massive companies are built over a 9-12 year period with lots of ups and probably more downs. Reputations are built in sticking with founders during hard times.
“Dumb Money” for me is definitely all the flock of Corporate Venture Capital funds (Not talking about GV or Capital G) but almost everyone else. Fundamentally, Corporate VC just does not work. VC is a 7+ year game and 99% of most corporates just don’t stick with it long enough to get good at it, nor are they structured well. I’d include as part of “Dumb Money” most of the non-tech Family Offices, folks who made $$ in other industries like Oil or Manufacturing and not willing to learn the rules (ie. arrogant) and thus get the table scraps of deals left over by the real Venture Capitalists. Many of these folks just don’t have the staying power to take the losses (or operate under unrealistic expectations) and learn how to do this tech investing well.
I really hate the term “Smart Money” & when a founder says it, it’s a clear sign they are an “out of towner” or arrogant idiot. Smart money means money that can help you with your business (ALOT) beyond just giving you cash. The reality is that it is a very small subset in the VC & Angel Community. No surprise these are usually the big brands like Benchmark, A16Z, Sequoia, Founders Fund, Emergence or the awesome folks at Floodgate, Felicis, True, Uncorked, First Round, Pear, NFX, Cowboy or Baseline in the earlier stage. (I’m clearly missing alot of folks here).
Investing in Tech (just like investing in equities or Bonds or Options) is an Art and Craft. It takes time, commitment and willingness to learn. As they say here in Silicon Valley, “There are two kinds of investors, those who are humble and those who are about to be humbled.”
If you want to read more, the very smart folks at Tribe Capital wrote about this back in April.
https://tribecap.co/fast-money-slow-money-in-vc-during-a-financial-crisis/
For Founders out there make sure you know who you are partnering with when you raise money. You won’t know who will have your back when things get bad but some understanding of which category they fit in will help you in the long run. This way you will not be too surprised when they eventually bail or turn on you.
Who I Am & 5 Signs of the Top of the Bubble in Silicon Valley
Why Should you Read My Stuff
Well, i think i have a slightly different take on tech with a career spanning startups, operating exec at big tech co and early stage investor.
I’ve seen a lot over the last 21 years and hope to share some observations which i believe could actually be interesting for both insiders and outsiders to Silicon Valley. Plus, I tend to be pretty opinionated, bluntly direct and hope to occasionally share something insightful (stress on occasionally).
I’ve been in San Francisco for over 21 years, was an early employee running online marketing at online ecommerce retailer Alibris in 1999 which raised over $64M during its life (crazy times). I was lucky to join Yahoo! during the turnaround in starting in 2001 and rose thru the ranks as an executive in the international operations for 10.5 years traveling all around the world. Spent 2 years as angel investor, board and advisory board member on several startups & mentor at two dozen startup accelerators across the globe.
Most recently was a Partner at 500 Startups, helped start the SF office and ran the core accelerator program and invested in over 400 pre-seed and seed startups during my 6 years there. Notable investments & startups i have invested and worked with include Eaze, Indio, Embroker, Manychat, RapidAPI, Aircall, Pipefy, Shippo, Vela among many others.
I left 500 Startups at the end of 2019 to reset & reflect, do the Tech Conference speaking circuit scene in 2020 and possibly do some angel investing. Covid-19 kind of put a kibosh on all of that.
So now keeping busy doing some executive coaching for a few late stage startups, volunteer mentoring at some international startup accelerators, being a Fellow at Creative Destruction Labs Montreal, speaking at many virtual conferences and webinars, and a proud member of the Silicon Valley Squares Zoom show: https://www.siliconvalleysquares.com
Basically just an observer of the tech scene as an Inside-Outsider while “Sheltered in Place” for the foreseeable future.
TLDR; Highly opinionated views from 21 year career in startups, Big tech & Venture Capital.
5 Signs of the Top of Bubble & Coming Apocalypse in Silicon Valley (USEFUL for the NEXT ONE):
Having lived in San Francisco since 1999 i had the fortune or misfortune of being part of 2 prior Gold Rush Eras in tech.
Harvard MBAs show up and we get flood of ex-I-Bankers and Management Consultants wanting to be VCs or Startup Founders as it seems to be “SURE Way” to become “Rich”
Big Non-Tech Corporates start to show up in Silicon Valley. We see them set up VC Funds or Accelerators. Or my favorite, when the C-level execs come for their one week or two week “Tech Tourism” or what we call “Silicon Valley Startup Petting Zoo”
Sports & Hollywood Stars start to angel invest or start startups (or do both, think Jay Z and Tidal). For record Ashton Kucher and Joe Montana are notable exceptions to this.
Landlords on retail and commercial side get super greedy & ask for equity and try to rip you off more than normal
Flood of Unsophisticated aka “Dumb Money” coming from a bunch of un-named regions. Hint is that it’s usually from energy & resource rich countries not known for tech & just chasing the sexiness and supposed guaranteed riches of the tech industry. (I also note that this is a gross generalization because i have worked with some amazing LPs and investors from these regions.)
A BIG Check Mark on all 5 by Q3 of 2019.
And here we are. Bubble has burst due to Covid-19 and according to Bay Area Layoff Tracker we have over 136,000 layoffs.
https://projects.sfchronicle.com/2020/layoff-tracker/
An old saying comes to mind from 2001 Dotcom bubble. B2C now means “Back to Consulting” and B2B now means “Back to Banking.”
This is gonna suck and i don’t enjoy seeing this. But this rebuilding is when we will see alot of amazing new world changing startups and teams come to the fore. We just need to survive the nuclear winter of 2020 (and probably 2021).
Thanks to my friends Sean Li & Asher Siddiqi for providing feedback on this.