Nikola shows Silicon Valley can’t stop worshipping founders theverge.com/21454738/nikola…

There has been lots of talk recently about how the new cohort of mega funds might play out in venture. Josh had the most cogent analytical take I've heard, the "venture arrogance score".

What the 8th grade basketball is going on lol

How we @slow think software will probably eat the world... docsend.com/view/ah5wvb6bivv…

Announcing our newest $325M in new Slow Ventures funds led by @KevinColleran, @lessin, and @wquist with the new additions of @mmlightcap, @yrechtman, and @crabbylions medium.com/@slow/slow-ventur…

We asked @wquist from @slow about Gen Z founders and the trend of doing stunts to get attention. "I think it's copium." "I don't think we have founders who are capitalist enough. There's been an entire generation of founders who aren’t as focused on winning." "Big companies come from people addicted to winning in three places: customers, talent, and capital."

We’re excited to announce that we have raised $1.7 billion in Series C financing and have reached an agreement to acquire @SPPlusCorp (Nasdaq:SP). Please read our press release for more: metropolis.io/news/metropoli…

> “I think smaller constrained funds can produce higher returns in venture” > “this guy must be a shitty board member, don’t work with him” Incredible non-sequitur, thanks Scott

Exclusive: Y Combinator partner Surbhi Sarna has raised $30 million for a new startup, Collate, looking to bring AI to tedious paperwork for life sciences companies. @amyfeldman and I spoke to Sarna, who previously sold nVision Medical, for @forbes. forbes.com/sites/alexkonrad/…

👀👀 *SERVICETITAN SHARES INDICATED TO OPEN AT $150, IPO PRICE $71

Human Interest, a retirement startup, is in talks to raise about $200 million at a valuation of nearly $3 billion. This would more than double its $1.3 billion valuation from a year ago. Read the full story here: thein.fo/4nQvUx5

Government software @harjtaggar

Founder-led Stocks > Non Founder-led Source: Bain & Company

"We're not public market investors." - VCs, as they invest in companies that are bigger than 98% of public of companies

There is so much wisdom in such a small moustache!!! Todays episode with @wquist is absolute 🔥 discussing: Why 95% of venture isn’t really venture capital? Who the winners of the next decade of venture are? The 5 levers to price a business. 👇 thetwentyminutevc.com/will-q…

No VC today remembers Arthur Rock. But the founding partners of Kleiner Perkins and Sequoia worshipped him. Who are the role models in venture today? And could there be some learnings from that in diagnosing some of the industry's biggest problems?

There is a popular trope that venture investing is all about being contrarian. Every VC *wants* to be contrarian, but few truly are. There are longstanding structural & rational reasons why it's so hard to be. VC is an industry with immensely long feedback cycles (7+ years). But practically, practitioners at all levels need to demonstrate short term progress (2-3 years at a time) to develop their careers. Junior VCs want to be promoted every 2-3 years. They might want to switch firms. Senior VCs might also want to switch firms, or start their own firms. Tenured VCs still need to showcase interim progress to LPs to raise new funds every 2-3 years. At all levels, there is immense pressure to show portfolio progress in 2-3 year increments. Aside from exits, which are virtually impossible to come by that early, markups are the interim markers that supposedly demonstrate positive progress. A company that is re-valued at a higher mark from a new investor can carry a VC's portfolio, driving interim IRR and TVPI. What kinds of companies tend to get higher markups faster? The ones that are perceived to be the "hottest": high profile founders with pedigreed backgrounds, sexy spaces that are in favor (e.g. gen AI today, web3 a few years ago, horizontal SaaS before that), etc. They attract easier follow-on capital early on, and tend to attract it ahead of their traction. The speed & magnitude of early markups is more indicative of sector FOMO than fundamentals. What kinds of companies don't raise follow-on rounds as easily? The truly contrarian ones: the ones in unsexy spaces, the ones with off the beaten path founders, the ones that take longer to break out. They're the ones that might have to bootstrap, get profitable faster, and take non-traditional capital in the early days. Eventually, their outstanding metrics speak for themselves, but it can take years in the wilderness before that happens. It's so much easier as a VC at all levels to chase the hot companies in the hot spaces. They're easier to sell internally to partners, brag about to LPs, have pedigreed co-investors who provide peer comfort, and get press validation on "Top of X" lists. On top of that, they will show better performance numbers early on. Generally, I've seen VCs that follow a middle of the road consensus path have higher survival rates in the industry, even if their returns are lower. VC is very much an image game before it is a cash distribution game. If you're in high profile companies alongside well known investors, you're perceived to be a good investor yourself (regardless of the entry price/stage or actual returns from those investments). Everything is harder on the contrarian path. The companies are funkier. They're hard to sell to follow-on investors. They're chronically under-resourced. Everyone doubts the category. Venture is a lonely job. It's lonelier still when the majority of the industry thinks what you invest in is questionable. It's a lot easier when there's instant validation from teammates, bosses, industry peers, and even the press that you're in a "hot" company. Of course, the contrarian companies are the ones that end up producing the *best* returns (through a combination of lower entry prices, less dilution from greater capital efficiency, & TAM expansion as they tend to create net new markets). We all know that, in theory. But it's a long and windy road to get there, and everyone else is rolling their eyes along the way. The other challenge with the contrarian path: you have to be right (eventually). As much as we make fun of VC investors, the vast majority are quite intelligent, well educated, well trained, savvy, well networked, and have a decent nose for quality. When there is strong consensus *against* something, there's usually a very good reason. There are numerous examples of courageously contrarian venture bets that turned out badly, such as a prominent firm that went all-in on clean tech in 2006 & was derided for a decade afterwards (though has since made an epic comeback). The only thing worse than being wrong & losing money is to be the *only* one that was wrong & lost money. Mistakes are magnified on the contrarian path. You truly have to know something the market does not, which is much harder in practice than in theory. The funny thing about VC is while virtually everyone is keenly aware of the returns potential from being contrarian and right, it's extremely difficult to overcome the narrow 2 year view, one in which the individual needs a promotion, a new job, or a new fund (or just avoid being fired altogether) in that timeframe. Investing in funky companies whose sectors are out of favor, hard to describe, & need time to break out, don't make a strong case in most firms (and with many LPs). And deep down, startling few investors have the real confidence to bet that they are right to back those companies, when most other data points indicate they are wrong. The good news is there are rare firms, LPs, and individuals who pride themselves on embracing contrarianism. Some like Founders Fund hardcode it into their culture & processes. Some forward thinking LPs deliberately look for firms with off the run focus areas. Some individual VCs are relentless iconoclastic. It's not popular - by definition it can't ever be. But it hopefully will keep working, on occasion, in very big ways.

Your goal is to build a generational company. A VC's goal is to raise a new fund from their LPs. This Venn diagram has an intersection. That’s why VC exists. But that intersection is small. That's why you ignore most VC advice.

We asked @shaunmmaguire about Sequoia’s 50-year history, and the stories of companies that hit rough patches, lost momentum, and found a way to bounce back. "DoorDash really struggled to raise at least one or two rounds of funding." "[Airbnb] went through some incredibly hard times during COVID...it was easy to give up on them." "With Elon, SpaceX and Tesla were on the verge of death at multiple points."

A lot of people build startups to win the lottery instead of building the thing they'd build if they’d already won. The companies I'm most drawn to are ones that founders build as machines to do the stuff they want to do with other people who do, too. notboring.co/p/the-company-a…

Dropping soon…

I am thrilled to share that I am joining @a16z as a General Partner based here in NYC!

Do you really need co-founders at the earliest stages of your company? - @wquist

Anyone seriously contending that doubling and tripling down on your own investments is “following the crowd” is a just butthurt for missing out and doesn’t understand what it means to have real belief and conviction.

$320 million market cap at IPO. Today $7.9 billion. So much for the "you have to be valued >$1B to IPO" myth...

This morning, @chudson sent out a newsletter looking at the state of seed investing. Specifically, the difficult relationship between multistage firms and smaller seed funds. He laid out three scenarios which may emerge which I'll list here, but recommend reading his full write-up which is linked below. 1) Return to the status quo, where dedicated small firms do most of the lifting early on and mulstistage focuses mostly on Series A+. 2) Bifurcation of the market, where multistage firms aim for multibillion dollar exits, while seed firms take the more traditional billion dollar-ish companies. 3) Multistage hegemony, where LPs buy into the seed product from "venture banks" and start dropping smaller GPs — despite potentially worse returns. Of the three scenarios, I agree with Charles that the first is probably off the table. Until something breaks in the multistge model, it's not going away and they wont give up the foothold in seed. The second perhaps feels the most obvious, but I'm not sure it's workable. The biggest wins in venture come from non-consensus bets, and for a variety of reasons small managers are better positioned to make those. It could be that multistage firms continue hypercapitalising 'winners' to dominate markets, but it's not clear you can get workable exits with that strategy (see here: nitter.app/credistick/status/1833…). That means, unfortunately, the remaining scenario is that multistage may simply suffocate small managers by absorbing as much of the early stage LP capital as they can. We've already seen this at work (in the quoted post): small managers pay the price when large firms bust the market. We can also see, using Crunchbase data, that while multistage firms are a small share of total seed activity, that share is growing quickly. Seed activity appears to be at its lowest point since 2013, while engagement from three example multistage firms is still around 2021 levels. There are all kinds of concerning consequences for multistage firms continuing to capture market share at seed: - Primarily, they're not good at recognising non-consensus ideas, which dramatically slows down the emergence of disruptive ideas and the overall pace of innovation. - Secondly, their agenda is to brute-force growth with capital and PR. Not only will non-consensus ideas go undiscovered, but mediocre consensus tech will be pushed aggressively. The long term impact this may have on liquidity and returns is frankly depressing. Venture capital needs small firms, and it needs emerging managers. We all know the reasons why institutional LPs prefer to "buy IBM", which mostly come down to perverse incentives. These are things that can be fixed, from one end or another. The bifurcation of small and large funds is something I've written about before. Particularly in terms of reporting obligations for large firms that are primarily deploying pension money, and favourable treatment for small firms that are mostly deploying FO or HNW capital. Crucially, why large firms should be kept out of the earliest stages. There's a link to an article with more on that below. I'm deeply uncomfortable with where the venture market is headed, and have been for a long time. For small managers, it may become existential quicker than they imagine. For LPs, by the time "buying IBM" starts to look less appealing, there may not be many alternatives.

1/ What might you want to take away from today's Berkshire meeting? Focus on the way they think about the investing process. You are not them. You have a different circle of competence and different resources, needs and goals. How they think about investing is what matters.

Savage line from Bill Gurley's last appearance on Tim Ferriss: Bill Gurley: So this gets into some of the earlier stuff we talked about, just about how deep you go on investing history and understanding investors. But Silicon Valley, if there was a scale of financial sophistication between one and 10, and you would say a really smart person in New York is an 8.5, the average Silicon Valley person on financial literacy is a 2. ​ And it’s funny because they make fun of Wall Street, but it’s just out of ignorance, they don’t know anything. piped.video/HSVFZ2Qbv3I?t=4602

VCs have to say they’re “company builders,” entrepreneurs don’t have to say they’re “capital allocators.”

Was reminded of this today: Debt is best used to finance a *predictable future* Equity is best used to finance an *unpredictable future* The more debt you take on, the more confident you need to be in your ability to predict the future...

We need to stop calling financing all software startups ‘venture capital’ when it is just plain old ‘private equity’...