Why VCs Explaining “It Was Only 4% Of Our Fund” Is Misleading Minimization When a High Flying Startup Implodes.

When a High Flying Startup Implodes. As MultiBillion Dollar Private Companies Shrivel, What Their Investors Aren’t Saying About These Losses.

As more high-flyer private companies find their shine tarnished, investors (or adjacent VC-explainers) remind us that it’s unfortunate but actually a non-issue, so please, let’s move on and not rubberneck the pileup. Wait, what? Losing tens of millions of dollars (or more) is no big deal? Don’t people get fired for that?

The basic math suggests they’re, well, correct, at least if you’re just looking at first order impacts. In most cases, any single company represents a very small percentage of a venture fund’s total size (hold aside this is also because firms have been increasing their AUM at astonishing velocity). In fact, losing money on a meaningful percentage of startups isn’t just expected, it’s potentially evidence that you’re taking enough risk to hit some of the power law winners which will pay back your LPs many times over!

As cofounder of an early stage venture fund myself, I’m here to tell you that while these statements are accurate, they’re also misleading when trying to understand the broad impact these implosions may have upon a firm. Before you start tweeting ‘Man in the Arena’ quotations to me, my experience here isn’t limited to sideline punditry — although Homebrew has yet to be involved in any Unicorn->Zero events, I can think of two investments where we were “all in” across the seed, A and B rounds, only to see the companies ultimately return 0x, losing us almost $10m combined.

giant pink pencil eraser rubbing out a unicorn, digital art [DALL-E]

So when a venture firm tells you a previously high valued investment’s failure is NBD, here’s the checklist of implications that’s not always apparent to outsiders, ordered subjectively from least enduring to most calamitous.

Reputation Effect. Highly qualitative but a firm’s brand can be tarnished by their cheerleading and then awkward distancing from a deadicorn. Personally I believe these are great opportunities to ‘learn in public’ and distinguish oneself with how they might support impacted employees, and other bystanders. Others believe they’re moments to silently delete their Tweets.

Opportunity Cost of GP’s Time. At the average multistage fund, a GP might be making just a handful of investments per year (their ‘shots on goal’ so to speak). While across fund cycles and an entire partnership these sorts of issues normalize out, I can tell you for sure the lead partner might be wishing they had that ‘slot’ back, especially if they are early in their career.

Opportunity Cost of Follow-on Capital. Forget the initial investment being lost, and look more at whether there were subsequent follow-on checks written. Even with aggressive recycling, the average fund doesn’t have capital available to support every portfolio company through every round. That’s why some raise opportunity funds and/or stop doing their pro rata at some point. So the follow-on support that went into a later write-down came at the expense of other companies in the portfolio, some of whom would have been more accretive to the fund.

Opportunity Cost of Non-Investment in Competitors. When you pick your investment in a vertical you mostly have to steer clear of direct and adjacent competitors, especially if you were a lead check and/or a Board member. So if the failed company effectively blocked you from pursuing a startup that became a legitimate successful outcome, that’s doubly painful, again especially for the GP who is supposed to be picking winners in that sector. This is less of a problem when the entire vertical falls apart (think of the last generation of scooter startups).

Relationship Cost of SPVs/Direct Co-Investment and LP Credibility. Especially during the past decade bull run, when everything was up and to the right, venture investors loved to increase their exposure to companies by syndicating SPVs (or direct investment opportunities) to their LPs, friends and other industry luminaries. Those going to zero have some implicit (if not explicit) impact upon future enthusiasm for the VC firm.

Disappearing TVPI. “It was only 4% of the fund” could be true but you might have been carrying it at a current valuation of 100x that. You tend to make different sets of decisions when you feel like you’ve got an existing company that’s returning your fund multiple times over — maybe you don’t take money off the table in another investment, maybe you follow-on in other companies with more or less discipline, etc etc.
Going from showing your LPs quarterly reports suggesting your fund is top percentile to a new forecast is a relationship management challenge. Doubly hard if you’re in the midst of raising a new, larger fund (or recently closed one) on the back of the paper write-ups. The most impacted LPs maybe will ask questions about how much did you know or not know about the shenanigans, and why maybe it was in your best interest to be stay naive for a while? Modern version of the Upton Sinclair quote, “It is difficult to get a man to understand something, when his salary depends on his not understanding it.”

Look, I’m not picking on any specific company or firm, but rather this is what happens coming out of a pretty crazy few years. If a venture partnership is around for long enough they’ll end up experiencing all types of highs and lows, some self-induced and others almost nearly out of your control. It’s part of the business. But as an industry we’ve become experts at content marketing the shit out of our wins, the shiniest versions of what venture and startups can be. It’s my POV we learn much more together by sharing honestly and broadly as a community, even if the “why we invested” blog post from a few years ago sounds dumb in hindsight.

Now, Next, and At Exit: The Three Ways To Evaluate Compensation Before Accepting That New Startup Job. Salary Benchmarks Are Just a Single Piece of Data.

‘Sell calls.’ That’s what a conversation between a job candidate and a VC are called. We’re supposed to help seal the deal, get the person to sign on the line which is dotted [insert Glengarry Glen Ross gif]. Now, I LOVE these conversations with possible new team members, but take a very different approach. I don’t sell them. Instead I try to understand what they’re looking for in an opportunity and help confirm that this would be a great career move, if the match makes sense. But if it doesn’t, or they’re trying to understand the pros and cons of, say, starting their own company instead, I’ll talk to them about my POV, without trying to talk them into, or out of anything. [Now it just so happens we also have a very good close rate, but that’s because the startups in our portfolio are typically interesting, rewarding places to be and they are thoughtful in the candidates pursued].

Recently in speaking with an engineering manager candidate who had been working at later stage/public companies, we got to discussing compensation. Not the specifics of his offer — I don’t negotiate on behalf of the company, just provide advice to both sides — but more about how he should think about it vis a vis his previous employers. My framework was a sort of triangle, and here are the three sides:

a female computer scientist looking into a crystal ball, digital art [DALL-E]


Use available benchmarks (public, from friends, etc) to understand whether your offer is generally ‘fair.’ Once you’ve established that, and especially if there’s an opportunity to trade off cash compensation for equity [some startups will present two offers for you to choose from, or be open to some negotiation], figure out what your floor is for near-term salary. And don’t go to the startup if they can’t get above it in some easy or creative way.

The reality is that most hires to early stage startups will be taking a near-term hit to cash compensation or at the very least, earning less than they could if they *only* prioritized salary (and not role, company, or equity upside). The ‘below market’ hit way smaller than it was 10–20 years ago for sure, but it still exists, especially at seed and Series A stage. I want candidates to earn above their stress level: they shouldn’t have to remain in a bad living situation, fall behind on student loan payments, and so on, just to join a promising startup. Because that startup needs 100% of their professional focus and distraction benefits neither party. It’s also a reminder why keeping your personal burn rate low is such a career expanding move. If your personal burn rate floor is high because you’ve been living off a Google salary and can’t imagine how you’d survive earning less, you won’t find most seed stage startup offers to be competitive in the near-term. And I’ll tell you that during our call.


Most candidates aren’t thinking about ‘Next’ because it’s only conceptual, but I find it is important to discuss. Basically, do they think there’s room for promotion and ongoing recognition/retention compensation? They should have this conversation prospectively with the founder/hiring manager just to understand the startup’s emerging compensation philosophy. Sometimes a fair, but not bracket busting, initial offer grows more attractive when you realize there’s ability to get other bites at the apple as your role within the company (and the company itself) grows. Now, with very few exceptions (usually at the executive levels), these compensation reviews aren’t written into you offer letter, but if you don’t trust the company’s forward looking statements and the culture they hope to create, please don’t join in the first place!

At Exit

What do you want your equity to be worth at exit? Kind of a crazy question to ask, right? I mean, who knows, I just want it to be worth a lot! But think about it similar to the way a venture investor might. If I buy 10% of the startup at seed, with say, a $10m valuation, what do I think I’ll net if the company exits for $1b (rosy scenario!). Well, I’ll probably do my pro rata in the A, then take some dilution, so let’s figure I own 4% when it’s all said and done. Ok, I turned my $1m initial (plus let’s say another $1m in pro rata) into $40m. Nice!

As an employee you can do similar math with a little help from the company. You’re a senior engineer joining early, and get 1% (remember I believe in giving early team members meaningful upside). You don’t do pro rata per se, but you do get additional grants as you get promoted/retained, so not crazy to say you end up at exit (in the above scenario) with .4%, to use same dilution multiple. Ok, so if this company is worth $1b, then you walk away with $4m in equity (and $20m at $5b, etc). Or maybe the company is ‘only’ worth $500m at exit but raised less capital and you’re still at 1%, so $5m in equity. Whatever, it’s all ‘fake math’ until the exit occurs, but thinking in this way sort of gives you the answer to where “NOW” + “NEXT” can lead. And you can do your own scenario planning for what types of exit scenarios are interesting to you.

Compensation is a very personal situation based on your own situation, risk tolerance, and company philosophy. Some people are in a position to take on more risk than others. And some people are blindly given more or less than they deserve. Volumes have been written about these questions and I won’t address any of them here. Instead just take away this simple triangle to perhaps help you frame the compensation package from an early stage startup. And if I’m fortunate enough to be talking with you about a job at a Homebrew portfolio company, this is what I’d be telling you during our non-sell ‘sell call’ 🙂

“There is magic in the trying and learning and trying again.. but any unprocessed PTSD will come back to haunt you” Avni Patel Thompson on the Superpowers Of Second Time Founders

Sometimes you meet a founder during a startup pitch and you just know you’re going to be friends, regardless of whether they take your money or not. Avni Patel Thompson is one of those people. And I was right! So when writing about Second Time Founders, Avni came to the top of my list. We’ve talked often about this topic and a quick interview turned into the thoughts below (and you can get amazing essays on startup life from her free Substack newsletter).

I like being a second-time founder.

It’s like having your second kid. You don’t sweat the small stuff because you know what the small stuff actually is. You feel more confident in your instincts and rely on your gut more than your hyperactive mind and what other hyperactive minds around you tell you.

You have a general sense of the shape of things — the highs, the lows, the things to watch out for, the things to not stress about so desperately.

Being a second time founder is such a gift in so many ways.

But it can also be a danger. There is a unique flavor of paranoid confidence that is bestowed upon repeat founders — more confident in what’s possible and how to pursue it, but also constantly aware of all the ways you can fuck it up.

Beyond that, startup years are hard on a founder. The hours worked, the heart and soul consumed, the impossible decisions, the painful people calls. All buried deep down, in service of keeping the company alive.

All of this accumulates and unless it’s being processed by some high power therapy (which, let’s be honest, for most of us, it isn’t), it’s just pile on and piles up, a toxic carbon compressed under the highest of pressures into a deadly diamond that is what shines when others look at us.

But we know the truth. It’s dangerous if not handled correctly. Instead of the being the hardest substance that gives us superhuman strength, it can be the brittle kryptonite that crumbles with the wrong crack and leads to our downfall.

If you’ve been a founder and you’re considering getting back into the arena here’s what I would say are the 3 biggest superpowers you can count on and the 3 areas of danger to be aware of.

superwoman fighting miniature dragons, comic art [DALL-E]

The ‘upside’

You trust your gut more than any other input. This, I think is THE most important thing, and my guess for if second time founders are more successful, the reason why. That you even have a gut to trust. Over the months and years of the first company, we’ve all built up a sense of how to things and how to do it in a way that works for us. With Poppy, I would constantly be asking others how to think about hiring and giving equity; about raising money; about product sprints and growth. With Milo, I know how to do it, and how I can do it better and faster for me. Doesn’t make the doing of it any of any easier per se, but at least this time around I don’t have the weight of my newness weighing me down at each turn.

You can make bigger, bolder calls. Because you know the lay of the start-up game better, you can start being bolder on what you’re building, especially because it’s likely you’re able to raise more capital to do it with. You’re also building with all the hard fought learnings you gained from yes, your last startup, but also all the other experiences in your life. You’re able to connect more dots in more unique ways because you have more insight and instinct.

You can do more, because you can see more.

That said, this cuts both ways. Being a repeat founder carries the burden of knowing when a thing isn’t working and knowing that you have to make harsher calls, faster. You can’t claim ignorance. So you have to make the equally bigger, more brutal team and product calls.

You can out persist even your former self. This one stands to be really proven but, in my case, my first start-up was sort of accidental. I was curious more than anything and I found myself trying to do right by a product that just took off. To start Milo, I had to make the explicit call that I was going to do this again. That I was willing to devote the next decade of my life — of my girls’ lives — to this. That made me choose a problem and a space that I knew I could make my life’s work if I was lucky enough to keep it going. I started this one knowing that it was a marathon and have been pacing myself as such. It’s still at a sprint pace but one that I know how to maintain when and how I need to.

I could tell you more ways being a second time founder helps — established investor network, better hiring pool, focus on distribution vs. product — but in the end, all that matters, I think, is that it gives me the confidence to do a thing that requires endless boatloads of it, powered by my gut, which I trust above all. Even above my closest mentors and friends. That’s the ultimate superpower.

And the ‘downside’

And if those are the things you can count on as tailwinds, here’s what I think are the headwinds:

Any unprocessed PTSD will come back to haunt you. There’s a joke among founders that no matter what space you work in on the first, you vow to never do that again. Marketplace people jumping to saas software, saas people jumping to hardware, hardware people jumping to anything else. It’s one of those “if you don’t laugh, you’ll cry” kind of jokes.

Because what each of us works on is extraordinarily complex and we learn the hard way all the brick walls that exist in a category (by running head first into them, realizing it’s not one that can be bust through, and leading our battered bodies and teams around it). For Poppy, it was the relentlessness of building a marketplace — there was literally never rest. Fix one side, break the other and on and on you go, forever. That’s the game. Add on the labor law and trust and safety parts of a childcare marketplace and I vowed to myself to take a break from people and marketplaces and to go into “just” software.

That PTSD put blinders on me on how a true solution would work for what I’m building with Milo until I was willing to reconsider both people and a marketplace. Then, guess what? An unlock based on my ability to build with both.

The lesson? Rest. And then process that PTSD so you can build this next start-up without any of the bad baggage.

Your knowing too much can stay your hand and make you timid. There is power in the sheer naivety of a first-time founder. I was too clueless to know better, and in a lot of ways, it helped me keep going even in the face of stupid odds. This time around, I would get into my head before I could ever get going on a thing. The fear would roar louder, fuelled by the memory and pain and skepticism held by my body. I would hypothesize all the ways this thing wouldn’t work, or couldn’t make money or would just result in weeks wasted. Ironically, I wasted weeks because my “knowing too much” got in my own way.

In time, I had to learn to just focus on my best testable hypothesis. To use all my knowledge to craft that, and then to just get going. Knowing better can be a good thing — but let it power your gut, not cloud your mind.

It can keep you in the game too long. It almost doesn’t matter how your first startup went. The second go at it comes with higher stakes. If you knocked it out of the park, you’re being chased by the ghosts of a “one-hit-wonder”. If you failed and either ended up as an “acquihire” or a shut-down like Poppy, you’re been chased by the ghosts of “don’t actually have what it takes”. Either way, this point of ego and pride plays with your mind and how long you persist on a thing. I’ve found myself going longer on a product or a direction because “it had to work” and “I couldn’t fail” more than what actually served the company. I’ve had to honestly just get over this. To know that my worth as a founder isn’t wrapped up in the outcome of even this go at it, but rather how I go about building it. That even if this were to end again not how I wished, that I would still have a next chapter. This is really harder to do in practice than theory, especially when you have a family and bills to pay and a very real “opportunity cost”. And yet. Ironically, this can make you make the kind of bad calls that will sink you anyway. Stay in the game as long as it serves the purpose and serves you.

I love being a second time founder. But as you can see, the benefits come at a cost, as most things of value do.

Above all: I wake up with gratitude. That I’m one of the lucky few that gets to do this job. That gets to get up and try. Again and again and again. And if the cost is that I need to be as self-aware as I can, of my own limitations and fallibility, I’m okay with that.

Because breakthrough lies in the trying again and again. In the 10,000 ways that don’t work until you find the one that does.

So my hope is for the world to have countless second and third and fourth time founders, no matter the individual result.

There is magic in the trying and learning and trying again.

And I wouldn’t change that superpower, no matter all the kryptonite.

“Being a 2nd time founder is basically figuring out how to leverage all your hype without believing it”

Joe Fernandez (Klout, Joymode, NewCo) On What Changes After Your First Company

I’m currently obsessing on repeat founders, and what lessons they want to share with the startup community. Just like my earlier request of Sean Byrnes, it made sense to pub Joe Fernandez’s response in full (thanks Joe!). Joe is a good friend and someone I love working alongside (Homebrew invested in Joymode and his current unannounced company).

large dollars bills chasing a young man, digital art [DALL-E]

Yeah, this hits a bunch of different ways.

So on the funding there are a couple of interesting things. When I am pitching a new idea I don’t really want the benefit of the doubt. I want a reality check against something I am considering spending the next 10+ years of my life on. While it’s nice that people are more inclined to lean in, I often feel like I am missing the conversation I want to have. It also puts a lot of doubt in my mind of how valuable of a thought partner that investor might be down the road.

I see this happen the most with new funds. It’s not because I think these investors are any less talented at evaluating ideas but they are highly incentivized to close “hot” deals. They are unlikely to have real results when they go to raise their next fund so they want the story of x, y and z proven, successful, founders choosing to work with them.

Lots of stuff comes to mind around team. The first thing I’ve found happen is that when word gets out you’re working on something new a bunch of people will want to connect about joining. 95% of the time this isn’t the people you actually want or need at this stage. You end up with a lot of people who have no could care less about the mission but know employees at your last company cashed out so they want in. Then there is the people that are hungry to get behind a mission they care about but have a romantic idea of what the earliest days of a startup are like and are totally detached from reality. Then the biggest group (which usually overlaps with the first two) are people who just don’t have relevant skills for this stage of the company.

This ends up being a weird distraction. You have these inbound people that are from your network so it can be socially awkward to just blow them off. Then when you tell them it’s not a fit it can be painful. For example, I had a friend who wanted to get involved in Joymode. I told them no and then when they would see press about us and think we were doing well it would just dig at the wound. They felt like if I was really their friend I would have let them on the bus (no thank you for the pain I saved them in the end of course). Meanwhile, you still have to go out and recruit the actually people you need.

As a first time ceo at Klout I would often look at my board and think “these people were involved in some of the most important companies in our industry, I should probably listen to them”. I easily lost a year or two doing dumb shit my board told me was a good idea. That’s definitely not their fault. It took me too long to realize that world we are building in is dynamic and every company, market and moment in time is different. No one knows anything. It’s all just data points.

I see my team looking at me the same way I used to look at my board and it freaks me out. I tell the team I want them to push back on me, but it’s asking a lot. A debate or any conversation with the ceo is never on even terms but it’s way harder with a 2nd time founder. I just have way more experience than almost anyone I am working with at this point so the depth, pace and scope of the conversation can be overwhelming for someone not used to it. The problem with this is that I can request people to push back and then “win” debates without actually being right. It also just doesn’t make people feel good and motivate them to push back on future bad ideas.

Being a 2nd time founder is basically figuring out how to leverage all your hype without believing it

Women’s Health & Women’s Rights Are One In The Same

Satya and I signed Homebrew on to an effort called VCsForRepro alongside ~100+ other investors representing over $100b in AUM. The organizers did a great job pulling together a coalition of folks willing to say that the ability for women to make choices about their reproductive lives is pro-health, pro-business, and pro-innovation.

We may not all hold the same beliefs when it comes to this issue – I don’t even assume that my specific feelings here are shared across the other signees – but the autonomy of an individual and the rights previously granted under law are quite meaningful to me. It’s too bad more of the traditional top VCs didn’t join this effort. That’s one reason that we never wanted Homebrew to get large – you lose the ability to live your values cohesively and consistently.

Thanks as well for TechCrunch coverage to get the word out.

“You have to fight the urge to do everything the same way you did it the first time:” Pros and Cons of Being a Repeat Founder. Some guidance from an understudied segment of the startup ecosystem.

Our industry talks about ‘repeat founders’ with a lot of reverence and for good reason given the commitment required to build a startup. We also sometimes think of it as a single cohort, but there’s a probably more nuance. The ‘first startup failed but she learned on someone else’s dime and now is a killer CEO’ experience might be different than the ‘first one was a big success and now the question is whether she can top that’ in terms of what’s being built, how she’s building it, and the pressure she feels.

a very tired panda looking in the mirror, digital art [DALL-E]

I’m also guessing (does anyone have data?) that the number of repeat founders is increasing non-linearly as more and more entrepreneurs start earlier in their careers, so understanding patterns among this group has never been more relevant. With this in mind I asked a few ‘repeaters’ about their own experiences, largely to use as background to inform my own opinions. One person was my friend Sean Byrnes is a multiple time founder and writes about his experiences + advice for CEOs/founders in a free weekly newsletter called Breaking Point. His response to my question about pros and cons of ‘the second time’ was so good that I’m going to share it in full.

You’ve hit on a topic I could talk about for hours! Feel free to attribute any of the following to me, but I’m not sure if they fit exactly what you’re looking for:

Pros of being a 2nd time founder:

1. You can enjoy the ride a lot more. It’s like riding a roller coaster: the first time you ride a new coaster you are scared the entire time because you don’t know what to expect at every turn. The second time you can enjoy the ride, but when you know it’s time to be scared you are MORE scared than you were the first time.

2. Because of #1 it’s a lot easier to listen to everyone around you. Since you’re listening more, everyone around you feels heard and as a result they appreciate your leadership more. It creates a virtuous cycle of you as the “experienced founder” mostly because you’re calm and confident while listening to them.

3. You know how your decisions today are likely to play out over the coming years so you can have more confidence in them. You can also coach your team to think longer term for the same reason, leading to better decisions everywhere. That foresight again reinforces the idea of the “experienced founder” since it sounds like you have a crystal ball.

Cons of being a 2nd time founder:

1. You have to fight the urge to do everything the same way you did it the first time. Not only is the world a lot different than your first trip, it’s not entirely clear if what you did the first time was a cause of success or just noise. However, everyone around you WANTS you to do it the same way you did it the first time because that’s your experience. As a result, you’re fighting a lot of forces to do things in new ways and not be a prisoner of your history.

2. You have more to lose. As a first time founder you have nothing but upside, regardless of what happens with your company, since it’s a resume and experience builder. A 2nd time founder (especially one who has seen success) risks tarnishing their resume/reputation with a failure. That means you can be less ambitious and not as willing to take risks. It’s a daily struggle.

3. Expectations are higher. Even if it’s not true, people feel that second-time founders should be more successful. As a result, the people around you are less forgiving of massive mistakes, big pivots and other course corrections that are necessary on the startup path. Everyone starts out believing in this image of a second time founder as having “the formula” and everything that cracks that image wears away at their confidence.

You can, of course, overcome most of those Cons through transparency and honesty which is easier because of the Pros. Oddly, I don’t see many second time founders take that route as they enjoy the feeling of being seen as having the answers. It’s an addictive cocktail to have an easier time raising money and hiring your team, especially if you struggled in your first company.

I’m still digesting some of the other responses and trying to get their permission to share like I did Sean’s. Hopefully more to come!

Two Questions To Ask During Hiring Reference Checks Instead Of “Where Can They Improve?” Be Specific About Situations & Create a Permission Structure for Honesty

I LOVE doing reference checks — on founders we are hoping to support and key hires into their teams. On-sheet (provided by the individual) and back-channel are both valuable in their own ways. Don’t incorrectly write off the ‘candidate supplied references’ thinking that it’s worthless to speak with people who have been prepped or likely to be positive. Sometimes you just need to ask better questions. Here are two that I’ve found to be expecially useful.

businessman on a phone call writing notes on a pad, digital art [DALL-E]
  1. “If a colleague of [name] didn’t want to work with them again, what reasons could you imagine them giving for this decision?”

Rather than just ask generally about “strengths and opportunities” or “when are they at their best vs when do they struggle,” you want to always try and ground the reference in someone’s actual lived experiences. Additionally, creating a permission structure to talk about how *others* have reacted to the candidate gives the reference a chance to provide observations without having to own the opinions themselves.

You can use the answer to this question in two ways. First to identify behaviors and styles that might be situational and to consider whether the hiring org and new role are well-suited given these past experiences. Second, to test self-awareness by asking the candidate this same question and comparing the results. Are they aligned with what their on-sheet reference told you? If not, guide the discussion over to the specific feedback and gauge openness to hearing it, potential defensiveness and so on. In my mind a great reference call will not just assist in the hire/no hire decision, but aid you in making that person successful once they start by getting a sense of where and how they might need coaching.

2. “One of my responsibilities is to help [name] be a great CEO. Where do you think they might need some guidance or support? How do they like to receive feedback?”

Many of the founders we back are first-time CEOs, and some of these folks are stepping into that title as first-time managers. That doesn’t give us pause — we love ambitious people who take the responsibility of leadership seriously. Where they’ll need to develop to be successful — and how their natural instincts/previous work prepared them for this next step — is really valuable context for our relationship with them.

The tendency when probing on this area is to ask a version of “Do you think [name] will be a good CEO and why?” That’s fine, you’re likely to get a list of strengths that this individual has displayed in previous jobs. But again, similar to the example in #1, I believe in a more specific framing: where is this person going to need help and how can we provide this support in a way that’s effective for them? Armed with this information we’re going to be in this founder’s corner from Day One, trying to build trust, keeping an eye open for their blind spots, and getting them feedback in the manner they appreciate (the whole ‘effective communication is not about speaking but about being heard’).

Framing the question in this positive way also establishes advocacy and a growth mindset, not judgment and fixed notion of what the CEO may, or may not, be capable of. And it’s consistent with Homebrew’s mission/brand promise.

“As a Senator, the first project I’d tackle would be immigration.” Me! in Conversation with Sar Haribhakti

I love doing quick Five Question Interviews to learn more about people in my community. Sar Haribhakti took it a bit further — I think he does closer to 15 questions 🤣 — but enjoyed being on the other side of the table for this Q&A (“Coffee brew, political takes, and shop talk with Hunter Walk of Homebrew

Paid Subscriptions Aren’t Enough. Why Substack Should Build An App Store

Helping Writers Monetize Their Free Readers More Effectively By Opening The Platform Up (and Taking a Cut)

Consider me a fan of Substack. Yes, I disagree with aspects of their content policies (and occasionally wince at the arguments they make to defend said choices), but the company founders fundamentally want to see writers do their best work and make a great living in the process. Getting creatives paid is a mission I’ll always support.

a happy writer, sitting on a pile of money, digital art (DALL-E)

Beyond the aforementioned community standards questions they inspire a lot of public debate for something which is basically a CMS, email list management tool and Stripe integration. One way to understand the coverage is via Aaron Zamost’s important narrative clock metaphor. The fact Substack raised large amounts of capital during a particularly bullish time in our industry (and the people they raised it from) made them a particularly delicious topic.

A company’s narrative moves like a clock: it starts at midnight, ticking off the hours. The tone and sentiment about how a business is doing move from positive (sunrise, midday) to negative (dusk, darkness). And often the story returns to midnight, rebirth and a new day.”

But this isn’t a post about any of that. At least not directly. Instead consider it a companion to my “Why a Paid Newsletter Won’t Be Enough Money for Most Writers.

So long as Substack offers a great publishing platform (and helps grow audiences) they will have enough writers. Yes, Author Development will still be a staffed function and various incentives (such as the well-covered Pro guarantees) may exist, but I’m actually not worried about the ‘supply side’ of their business, at least at the top of the funnel.

What does give me pause is how many of those publications will (i) want to monetize at all [you can just use Substack as a free newsletter publishing tool if you want], (ii) how much revenue those writers will be able to make directly from a subscription fee [sidenote — one ‘risk’ of the Substack Recommendations product is it yields primarily low paid conversion rate new subscribers, which means monetizing free readers becomes more important] and (iii) a belief that Substack’s 10% take rate isn’t sufficient margin for them to grow a scaled robust business. Hence, and now we get to the title of this post, Substack Needs an App Store.

What do I mean by ‘app store’ in this case? Substack should partner with a broad set of 3rd party products to enable deep integrations inside of their newsletters. Kinda like Heroku, Shopify, Salesforce style app store more so than Apple. You’d need a basic developer platform and some APIs that to the best of my knowledge don’t publicly exist yet.

What “deep integration” benefits does a partner get for working through Substack: ability to make use of the data about the publication, its subscribers in aggregate, and even the individual reader in order to maximize the performance of the specific ‘app.’ In return, Substack should take a percentage of the revenue produced by that app (from the app provider side, not the author’s cut, even though yes, I realize that it’s kinda semantics if you’re talking about one pool).

Examples of ‘apps’ that I see working today in Substack newsletters:

  • Job boards like Pallet (some writers are making an incremental six figures a year from these links — or at least they were in the go go hiring market of 2021)
  • Branded creator merchandise
  • Event tickets
  • Books, music, and other content downloads
  • Maybe even one day… sponsorships (which I see as different than programmatic advertising, which the company has been opposed to)

and so on….

I’m not suggesting that Substack create a walled garden — any author should continue to be able to embed or link to any service that complies the platform’s general Terms of Service. But Substack should offer to ‘enhance’ strategic partners in a way which grows the pie (while taking their share).

And also they’d need to cross the rubicon on data and targeting: how much granular data do they want to make available to these partner apps and under what terms. We’ve already seen with Facebook and others what can happen when a developer platform is too promiscuous or encounters bad actors.

But there’s real value — to all sides of the transaction — with better personalization. For example, customize the Pallet job links more specifically to me as opposed to just the general subscriber base. Pitch me coffee mug merch (since you can tell I like that) while showing a different reader t-shirts (since they seem to have bought those in the past from other Substack authors). And so on. Interest, geo, demographic and other dynamic customization which improves the performance of these ‘apps.’ Incentives like this will also inspire new types of units to be built for Substack by 3rd parties which might otherwise not take the risk.

My stake in the ground is that Substack needs to figure out how to make more money per reader without directly increasing their subscription take rate. And this is the best solution I have for that problem: the Substack App Store.

Like Bourbon and Whiskey? A New Auction Site Is Making It Easy to Buy (Too Easy According to My Credit Card Statement!)

Five Questions With Unicorn Auctions Cofounder Cody Modeer

My hobbies are largely consumptive: coffee and whiskey (the former to excess and the latter more modestly). Whiskey, specifically bourbon, scratches a bunch of itches for me: a love of American history, a community of people to share the enjoyment, and a deep rabbit hole of bottles to sample. During the initial lockdown, a lot of this enthusiasm moved from bars and IRL meetups to the best available option: socially distanced together, whether it be zoom happy hours and online groups. Around the same time a new Chicago-based business opened, Unicorn Auctions, which quickly started growing from a few hundred bottles up for grabs once a month, to thousands with sometimes bimonthly sales.

Unicorn has taken liquor/spirits auctions, previously more niche and collectible here in the states, and made it mainstream. There’s no registration fee, you can pay for your lots with a credit card, and they can facilitate shipping your wins to you locally. In terms of what gets listed — well, it’s everything from daily drinkers to a rare pre-prohibition dusty. I wanted to learn a bit more about this website capturing my time and dollars, so asked cofounder Cody Modeer to answer a few questions for me.

Hunter Walk: Give me a little backstory on the founding of Unicorn Auctions. Something you’d been thinking about for a while or more of a ‘let’s just try this and see what happens’ side project?

Cody Modeer: Prior to launching Unicorn, I’d been working in the hospitality industry for about a decade. I opened a cocktail bar (Ward Eight) in 2012, and it was pretty successful. My co-founder AJ also had been in the business for years, so when we’d get together we’d end up talking about business ideas and the gaps in the industry that we noticed, just from working in it day in and day out. We started focusing on the auction industry, it seemed like we could bring a new take to that by focusing on spirits. It just felt like the time was right for Unicorn.

HW: Whiskey has really been growing in popularity over the last decade but the pandemic seemed to take it to a whole new level. Mix of bars/restaurants being closed, people drinking at home, and maybe even the general spike in prices of collectibles, crypto, stimmy checks and so on. Have you been surprised by the secondary market price trends?

CM: Definitely. Happily surprised. In February of 2020 we officially launched our first auction with bottles from our own personal collections, and in March we had to close my bar down for COVID safety, and the place AJ worked also closed down. So suddenly we had a lot more time to dedicate to Unicorn. And yes, we saw dramatic price increases as that first year went on. People were stuck in their houses with nothing to do and they had some extra cash from not going out or traveling. The timing just kind of worked out. One door closed and another one opened.

Dusty listed in the upcoming October auction

HW: Tell me more about the supply side of this business for you. Is it about getting a few big whales to list through Unicorn or is there a long tail of sellers that bring a handful of bottles to you all? Does the really rare stuff come from collectors or someone who had an old decanter their grandpa gave them and before Unicorn, limited legal options of how to sell it?

CM: We always wanted Unicorn to be more inclusive than the traditional auction houses. If someone gets a bottle for $50 and can sell it for $80, that profit can be meaningful to them. Traditional auction houses usually have minimums and focus more on curation, but that can exclude a lot of people from participating. There’s good reasons why the industry is the way that it is, but AJ and I both thought that if we could figure out a way to scale participation using technology as well as provide a little hospitality, a personal touch, we’d be in a good spot. And it’s not just on the sell side, there’s plenty of frustrated buyers out there that are tired of playing all the retail games and driving around for hours trying to find a particular bottle only to come up empty-handed.

But, to answer your question, we get all kinds, from 1 bottle to 3,000+ bottle collectors. Some are long term collectors looking to retire, some need cash to finish a remodel on their house, and some just need a little extra income to pay the bills. A lot are what you might call dabblers, people who buy and sell a few bottles here and there. We welcome all kinds.

HW: You’ll occasionally hear about counterfeits — you know, buying an empty Pappy bottle, refilling it. It’s pretty rare and I think the community is good about policing itself, but do you also have a hand in authenticating what’s sold on the site?

CM: Unicorn Auctions is a trust platform. We handle every bottle that comes through our auctions. We know the product and we stand by every bottle. By state law we’re required to take possession of every bottle that we auction, and our team does a great job of inspecting and flagging anything that may look off or damaged or unsellable for any reason. This is our only business, and we take the question of authenticity and provenance very seriously.

In the case of very rare and higher-end bottles, we work alongside other auction houses as well as other experts in the field to help us verify and make sure of what we have. If we don’t feel confident for any reason about a particular bottle, we’ll send it back.

HW: So it’s probably stupid of me to try and bring more folks to the auctions — I mean, I’m just creating more competition for the stuff I’m trying to win 🙂 — but if someone reading this is going to jump into the upcoming October auction, what are a few tips you’d give them?

CM: My approach is to go through an auction lot-by-lot and click the star to “watch” any lot I’m interested in. With bigger auctions, I’ll use the search to look for keywords like “Stitzel-Weller” or “Wild Turkey” to narrow it down. Then, I’ll track my watched lots over the course of the auction and ignore the stuff I’m not interested in. If an opportunity comes up to buy one of my starred lots at a good price, I’ll jump on it. There’s a little of the thrill of the chase in the whole process. But the best advice I could give to anyone just starting out in auctions is to buy what you like and have fun.

Thanks Cody! I’ve enjoyed buying on Unicorn, from releases that aren’t available locally in Bay Area, to older bottles that predate my getting into the hobby. If you’re a whiskey aficionado, or just bourbon-curious, I’d recommend giving them a try. During this exchange Cody offered to send me some stuff he liked, which was very generous, but didn’t impact the questions I asked him or any other quid pro quo.

My dream Unicorn bottle