As the 2019 holiday season comes around the corner, I thought it’d be worthwhile to share a loose collection of ideas bouncing around in my head during the first few months at Haystack. They’re learnings and observations emerged as a result of working at a seed firm and spending time in San Francisco. I hope there’s an off-chance these thoughts are relevant to folks.
The Seed “Product” and the A “Product:” Investment heuristics, level of engagement with the company, and the value proposition to founders differ between the seed and venture rounds. The commonly understood venture capital investment filters (large and interesting market, talented and entrepreneurial founding team, product that users love, differentiated and unique GTM, etc.) are fleshed out to a greater degree at the A because they can be. There’s a company to base decisions off of. Seed investing boils down to taking risks venture investors don’t want to take, and part of the firm’s job is defining what those risks are. This statement is hard to internalize until you’ve entered analysis paralysis on a seed investment. The following tweet from Sandy is a crisp articulation of how I feel.
The Investment Funnel: The investing part of the job boils down to four key activities: sourcing companies —> selecting deals —> winning access —> managing investments. These are frequently top of mind.
Sourcing: Which ponds do I fish in? How do I attract inbound flow? When do I go outbound and chase companies? The commonly-held wisdom for younger investors is to meet tons and tons of companies, in order to separate bad from good, good from great. You develop the high bar for talent and quality through reps.
Selecting: How do I develop the acumen and judgment to make good decisions? What even is a good decision-making process in venture?
Winning: Deal judgment =/= deal making. How do you convince a founder with offers on the table to choose you as a partner? Some of the iconic companies of our generation have always had competitive fundraising rounds, and most of the firms whose names you’d recognize make their bread by winning bakeoffs. Others have succeeded with idiosyncrasies, but you have to know where to pick your spots.
Managing: How can one engage with portfolio companies in ways that make sense for the investor and the founder? Given my background and how I spent my time, how can I be valuable? This will have the biggest learning curve for me, and I intend to learn through observation and practice.
Define a Style: Some successful investors spend all day in back-to-back meetings. Others go days without meeting a single person, and enjoy spending time researching and reading. The consistency is obsessiveness on crafting the schedule. Coming out of school, thinking critically about my schedule was a fairly new concept to me. Knowing the style of engagement with the outside world that works for you takes time to figure out, but it’s a common thread I see with people I admire. Consistency and thoughtfulness trump most things.
The Investor Gene: LPs will tell you that the best managers and investors in their portfolio aren’t obsessed with being founders or technologists, they’re obsessed with being investors. They have the investor gene. Of course, this entails supporting great entrepreneurs and lasting businesses, but it also involves thinking through portfolio construction, understanding the larger market dynamics and adoption curves, and battling personal psychology. I bring this up because I don’t think its talked about that much within the context of venture investing, which is typically viewed in relation to operating. I understand I’m early in my career, but I’ve found it worthwhile to try and understand what makes people exceptional at their work. For more color on the investor gene, I like this tweet from Kevin Durant, of all people. Don’t think about it too much — some people just like playing basketball 🤷♂️
Seeking Peers: It’s been useful early on to build a close-knit cohort of peer investors that I trust, can learn from, and whose company I genuinely enjoy. That last piece is critical. It’s easy to get lost early on in the sea of junior investors and the deal shuffling, but you don’t learn much or grow, professionally and personally, when that happens. Venture can be a lonely or isolating job, and support structures are built off of stronger foundations.
On Public Writing: I wrote more longer-form content publicly before I started my job. It's fun, put me in front of interesting people, and played a big part in helping me land my current role at Haystack. Now, I enter a bit of paralysis when I sit down to write blogs or essays. I'll sometimes end up reflecting the thought(s) through the lowest-hanging fruit: a tweet. People engage with the content, but something doesn't feel quite right.
The truth is that I don't want what I know to be cursory takes or pure observations misinterpreted as my final word. That’s why I resort to tweets. Medium fits message. Form fits function. However, tweets are fleeting in the night. They’re ephemeral, and at times, demonstrate a lack of depth. On the other hand, there's something about writing longer-form content online that feels a bit declarative. "Hey, I'm an expert on X and here's some Y insight.” The root of my issue is contained within an attempt to find a *consistent* means of publishing online that balances some degree of depth balanced with my ADD-esque level of interests.
Career Option Value: I was fortunate that these could be choices in the first place, but the decision not to pursue a role at a big consulting firm, bank, or tech company after school dramatically reduced my career choices. I chose not to buy the options. To be clear, this was less about working at a big company with a brand name, but more about me. I believe if you’re lucky enough to have an idea of what you want to do at a young age, and find yourself in the position to *try* it, then why not? Here’s the other way I would rationalize it.
From Pre-K all the way to senior year of college, one’s life is typically confined in pre-defined chunks — quarters, semesters, etc. The next phase is generally right around the corner at some set interval. Many people maintain this mindset and these intervals when they enter the workforce. Thus, the 2 year entry-level role. 2 years of B-school. Etc. But, what if you viewed your life on through a 10 year horizon? A 20 year horizon? A 30 year horizon? It feels slightly frightening, but it’s also incredibly liberating. You can be a lot more intentional and deliberate about what you do, and why you do it.
If you read this far…
I’ll break one of Semil’s cardinal rules. As generalist early investors, we shouldn’t be top-down prescriptive of where markets and companies will go. Instead, we look to founders to hold the keys to the car. However, I’m always one for ideas, and I couldn’t help myself — some things I’ve been noodling on with peers and friends:
Pure technology bets in enterprise infrastructure: Technical founders with a highly-acute point of view on a new technology or architecture. These primarily manifest themselves as open-source infrastructure (Hashicorp, GitLab), but also bubble to high-performance application layer tools from time to time (nTopology).
Data and liquidity eating old world value chains: More and more global supply chains continue to go online — wholesale trade, agriculture, commodities, freight, etc. Accompany transactions with insurance, lending, and logistics. Check out Sandhills.
Services and internal processes continuing to become APIs: There are so many rote and repetitive tasks large organizations have tiny teams working on. Look at what companies like Lob and Checkr have been able to do. The next step for digitized workflows: become developer platforms.
Efficient data aggregators: I love what Truework did. They’re building the next Experian (consumer identity and risk verification) by partnering with employers. Middesk is looking to become the next Dun & Bradstreet. I like companies that effectively gather, augment, rinse, and update mission-critical data sets, and enable solutions to be built on top of them.