I ran into Joe Hyrkin after his company Issuu (where he’d been CEO) was been purchased by Bending Spoons. Since I’m always interested in startup outcomes – especially those where there’s a private equity-like exit, Joe was kind enough to share the backstory with me, and here with you! Five Questions with Joe Hyrkin

Hunter Walk: You sold Issuu to Bending Spoons, which has recently acquired a number of legacy products including Evernote, Meetup, WeTransfer and Brightcove. Were you already engaged in a sales process with multiple parties, or was it really more of an opportunistic conversation between your company and them?

Joe Hyrkin:  I first started learning about and paying attention to Bending Spoons when they announced their acquisition of Evernote in January 2023. At the time, I thought they could be an interesting potential acquirer if we got to that point. By early 2024, we were sustainably profitable for a second time, on track to generate over $30 million in revenue and starting to get some PEs and strategics showing interest in Issuu.  

We hired a strong mid-market banker, Lightning Partners to help us with the process and got an introduction to Bending Spoons in April of 2024.  They [Bending Spoons] knew about us, but didn’t have extensive detail.  In many ways, we fit their model, a primarily product led growth self service platform with good retention and a large global footprint of users.  So we were in the early stages of a process when we had our first discussion with Bending Spoons and had a handful of seriously interested acquirers.  Once Bending Spoons indicated real interest in May, discussions progressed very quickly with them, while we continued engaging with the other parties. We ultimately signed a term sheet with a short exclusive period and finalized the transaction by July 18.  

Generally, I think CEOs that are interested in a future acquisition need to be building relationships or at least awareness with potential buyers at least 2-3 years in advance, especially with strategics. If you’re not on the list, it’s rare for a deal to happen, even with a good banker.  In the case of Issuu and Bending Spoons, we were aware of each other a year or so before the transaction, but didn’t really have meaningful discussions until three months prior to consummating the deal.

HW: If a CEO wants to understand whether there’s a M&A market for their company, how can they ‘take the temperature’ without scaring their team or investors? When is it right to engage your stakeholders?

JH: While we don’t discuss this very often, venture backed companies are expected to contribute to their investors providing a return to their LPs in a timely fashion..  In other words, an exit of some sort is needed.  Exits come in many forms, from an IPO at the high end, to secondary sales, private to private merger, strategic or PE acquisition, or sometimes, an acquihire or bankruptcy.  No one wants to be in the latter two categories!  While every CEO and founder wants to create the next impactful IPO oriented company, IPOs are rare, even in the best of times.  In the 2021 boom, there were 215 tech and media IPOs.  At the same time, there are in the range of 75,000 venture backed companies at any given moment.  So that means, the vast majority of successful companies will get acquired, if they’re lucky.  There is a myth in Silicon Valley that companies are bought not sold. In fact the opposite is true.  Buyers need to know who you are and why you matter to their customers, product offering and how you deliver value, before they can make an evaluation about you. CEOs should be prioritizing connecting with folks in the transaction ecosystem relevant to them, so that potential acquirers have familiarity with the rationale for a potential acquisition.  It doesn’t mean you hang a “for sale” sign on your front door or website, but get to know people.  It can never hurt.

Go to Banker conferences, like Goldman Sachs’ PICC or AGC’s annual event, where you can meet up with dozens of PEs, Bankers and some strategic buyers.  These events are organized as a conference format, so the discussions are casual and mixed with networking, planned appointments and good content. In 2-3 days, you can have dozens of conversations where you get to socialize your company and get a sense of what buyers might be looking for and how you fit. This is a good way to start exploring and getting connected and educated without spooking investors or employees.

In addition, take calls with bankers.  Make them short meetings, but take the calls. Bankers that show interest in you are constantly talking to everyone in and around your industry/ecosystem. In courting you for a future engagement, they’ll often share what they are learning in the market. It’s a great way to learn both about the process of an acquisition, and more importantly about what’s happening in the market from an objective well connected source.  There’s no obligation and it also allows for you to get a sense of which banker has the right expertise and connections for you.

Most importantly, identify the larger companies in your ecosystem that could be potential buyers and get to know the senior most people in Product Management, Corp Dev, BD and the management team.  Help them understand why you matter to their customers and their business.  Focus on a deep integrated business and real growth oriented partnership. Understand that there are dozens and maybe hundreds of other companies trying to do the same, so figure out how to stand out.  The point here is to build a partnership with the companies whose products are also used by your customers.  There might be half a dozen to a few dozen companies that fit this bill. Get to know the people (not just one person) in these companies, so that you’re familiar to them as they prioritize.

For Issuu, Canva was a natural potential acquirer. I went to Sydney, Australia 4 times in the 18 months prior to us getting acquired to build a relationship with a range of people within Canva. While they didn’t buy us, those trips did turn into a deep partnership, where Issuu was one of only 3 companies featured at their large developer conference, which led to being promoted, a much higher profile for us in the ecosystem and value for our joint users.

HW: Debt financing for startups can sometimes seem like ‘cheap money’ but it’s definitely more complicated than most founders realize. I saw your essay about this form of capital being a ‘Growth Engine or Growth Killer?’ Folks should read it fully but if you were going to stress one aspect of venture debt to a CEO, what would it be?

JH: Debt should be looked at as a legitimate financing tool for a start up as long as you’re clear about how it really works. As you mentioned, I shared my thoughts and experiences with debt in an article on Linkedin.

The most important aspect of venture debt is to fully understand the covenants, essentially business operations collateral, to which you are agreeing. These generally include revenue and cash in the bank commitments, and can sometimes include other elements.  Do not go into a debt deal unless you have full confidence that you can exceed those commitments.  I can’t emphasize this enough.  Most lenders expect you to miss the covenants. It’s why they are in the agreements and they make money in the form of more interest, penalties or a larger percentage of the company when you miss.  Too many CEOs go into a debt deal, thinking they’ll get pretty close and the lender will be flexible.  That’s a mistake. Debt financing itself is not bad. It turns sour if you don’t take the covenant element seriously. Too many CEOs treat covenants like a company KPI.  If you miss revenue by 10%, but exceed the product, NPS or number of customers, the Board generally treats the miss with some flexibility.  Debt lenders don’t. Do not treat it like you’re sharing a range of possible outcomes.

HW: You’ve seen several waves of technology over the last few decades – Internet, Cloud, Mobile, etc – how have these experiences shaped your opinion on the AI boom?

JH: In each of these waves, we see a large number of companies offering very similar products and services where it’s challenging to identify who the winners will be. In every cycle, a few emerge to be dominant and sustainable. We’re in a similar mode right now.  There will likely be a few foundational companies that become the primary platforms that will be used and everyone else will build applications or the equivalent on top of these models.  

Facebook is a great model to use for learning from the past.  When Facebook made it possible for developers to create games and other applications around 2007, they only had about 15-20 million uniques per month and they were struggling to figure out how to really grow.  At the time, there were dozens of smallish social networks and community sites. The debate was around continuing to build a destination and fight for users or leverage the platforms and distribute. In 2007, it wasn’t clear which strategy was correct.  Companies like Gaia where I worked or Second Life, stayed independent and companies like Zynga, Slide and Playdom built for the “containers” allowed on Facebook.  These latter distribution companies grew quickly and Facebook took full advantage of the new users that these creators drew to their games and content on Facebook. 

Initially Facebook allowed developers to keep the revenue generated within their product and was satisfied with the combination of monetizing around the developer’s content and huge influx of users.  Over time, as we’ve seen, Facebook, now Meta, has continually updated the ways they extract revenue and value from the developers to the point that in the case of some content, like news or particular games, it was no longer worth it for the developer, but Facebook/Meta already gained the users and could start monetizing them on their own.  We’ve seen the same situation with Apple where developers have to meet very specific requirements, have to pay for exposure and in many instances see their growth plateau, while Apple continues to expand their control.

I think everyone building on top of the LLMs today will be well served to pay attention to how this all unfolded with social network and marketplace ecosystems.  I’m confident that the future of AI will revolve around a few powerful LLMs and a massive number of application builders.  But, we don’t yet know if the real money is in applications, who will own the marketplaces or if the LLMs themselves will build applications and compete with developers. Even if they don’t compete with developers, we’re already seeing rapid business model changes. ChatGPT was free, then there was a $20 version and now a $200 version and enterprise offerings.  Even as prices for access fall, it’s likely the LLMs will roll out something akin to what we’ve seen in the past in terms of extracting more of the revenue, once reserved for developers. It’s not necessarily bad. A rising tide lifts all boats. It’s just important not to overly rely on a partner’s current business model in a fast evolving ecosystem.  No one wants to be the next Mic.

HW: What are one or two of your favorite questions to ask folks during job interviews?

JH:

• What do you do to consciously refine your intuition and wisdom?  Do you have particular practices or ways you pay attention to this.

• What’s the biggest mistake you made in a job? What was the actual impact?  How did you resolve or address it and how did you win confidence back?

• How can you impact the evolution from SEO reliance to LLM reliance for driving awareness, and growth?  And give real examples of what you know and can execute.  (This is important across all disciplines in a company)

Thanks Joe!

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Links, Links, Links

An Anonymous AI Engineer is Funding the City’s Oddest Events [Zara Stone/San Francisco Standard] – She’s 23, lives in SF, and works at an AI startup, but otherwise we don’t know much about francisco san. But she’s using $50,000 of her own money to fund ideas that organizers send her, such as a foot race where all runners carry flowers. Her website lists the status of stuff she’s funded, and the one time she was ripped off [“hot tubs on ocean beach, $2250”]. More of this please – keep SF weird.

Decision-Making [Molly Graham/Glue Club] – Molly relates her experiences as an instructor at the National Outdoor Leadership School (NOLS) and their decision making framework for groups, to her own experiences as an executive in technology companies.

A Sneaky Phish Just Grabbed my Mailchimp Mailing List [Troy Hunt/Have I Been Pwned] – Troy runs Have I Been Pwned, a useful site to check your personal information against what’s been leaked unencrypted in various hacks. Here he relates a recent story of having his own Mailchimp account hacked via a Spearphish. It’s instructive to read how ever really aware folks can fall victim to well constructed attempts (only going to get worse with AI)

GrandTheftAuto: Real Life [Jonathan Franklin/Businessweek] – Just a crazy overview of current trends in domestic car theft, and why about 10% of them end up being shipped overseas.

How the Irish Pub Became One of The Emerald Isle’s Greatest Exports [Liza Weisstuch/Smithsonian Magazine] – I usually think of the ‘self assembled bars’ as one of those Hard Rock Cafe style joints with just a bunch of memorabilia or other themed crap on the walls. But I never realized how many Irish Pubs are built this way too.

The Burren is one of the most recent projects of the Irish Pub Company, a Dublin-based design group that has created upwards of 2,000 pubs in more than 100 countries on every continent except Antarctica. Germany is its biggest European client, and Switzerland is a close second. In Russia, it has established three venues in Moscow, one in Sochi and one in Novosibirsk, in Siberia. The company’s handiwork is also found in the United Arab Emirates, Qatar, Bahrain, Japan, Nigeria and Mauritius, and at the New York-New York Hotel in Las Vegas. A project is currently underway in a new high-end shopping center in Tashkent, Uzbekistan. This year alone, the company has nine projects in various stages of completion, including in the Canary Islands and Hout Bay, a Cape Town suburb, as well as four under discussion.

Enjoy the rest of your weekend!

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1. People are surprised when I say “the right amount of fraud in seed stages startups is greater than zero.”
2. What I mean is, the community works best when we move quickly, and assume trust between parties. That will likely mean there are some founders who commit fraud (and some investors too I guess). The cost to the ecosystem for doing so much diligence and background checks to achieve zero fraud would punish the 99.9% of founders who are ethical. And punitive unfairly – there are probably people who are totally honest nice folks but you can always turn up a rumor or a mistake earlier in their lives – we don’t want these things to be disqualifying if they’re righteous now.
3. At each phase – Series A, B, etc – there should be *less* fraud. Because it gets discovered, stopped, or whatever. Basically, by IPO or other exit there should be aspirationally zero fraud.
4. Zero fraud is still likely impossible so we need mechanisms to punish those who are fraudulent at those stages. The fear of getting caught and paying the fine/doing the time is necessary alongside whatever morals/ethics they should have as individuals.
5. When financial fraudsters get pardoned for their crimes [Nikola, Ozy] before the punishment has been completed, it creates an environment that changes the calculation for those who might commit these crimes. This is wrong regardless of political beliefs and the two I cited above have nothing to do with regulatory policies of either party, but the rule of law.

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I knew I had to meet Molly. That’s what I felt when several friends separately mentioned her to me. It was either a very well coordinated inception or independent validation. Frankly, either would have piqued my interest (I’m pretty sure it was the latter). It only took a few Blue Bottle coffees for me to become an evangelist for her too. Molly is thoughtful, always evolving and an incredible believer in people, whom she backs via Moth Fund. And I recently asked her Five Questions.

Hunter Walk: Moth Fund says it “aims to increase the agency of exceptional individuals.” Say more about what that means (you cover some in your manifesto) and how it influences your investment decision framework?

Molly Mielke: My approach to investing is singularly focused on finding and developing relationships with outlier people. I do this by being weird myself and making myself findable in the right places — namely word-of-mouth from people whose taste I respect and by sharing how I see the world online. This approach was designed around my edge; I have an innate interest in understanding human beings and as a result, have different kinds of relationships with founders than most VCs.

I talk about my investment decision-making framework in detail here — I focus on gaining an understanding of a person’s motivation, spike, commercial aptitude, and how magnetic they are. 

I try to think rigorously about people and their potential, in part drawing from my experiences working with top founders over the past five years and the deep relationships I have with entrepreneurs in my cohort class.

HW: You write wonderful essays each quarter – what’s the process which goes into those? And what does ‘success’ look like for you with this energy?

MM: Each quarter I pick a (usually qualitative) “research” topic that I discuss with many of the brilliant investors, founders, and operators I meet with in the context of my investing role. I collect data points in conversation and start building my own theory of the topic, which I then write up and share with the world in the form of my quarterly essays.

I consider my writing a success if I’m able to produce words I can both stand behind/formally weave into my worldview and think are decently original/worth sharing with the world. Success also looks like having better conversations with the people I’m meeting — I find the process of truth-seeking together one that builds a lot of trust and understanding of each other. I am at my most honest and concentrated on the page, so sharing that version of myself online helps me put a stake in the ground about what I believe in and find others who resonate or disagree in interesting ways.

HW: I find you to be a thinker who uses other’s opinions to inform your own. As someone new’ish to venture capital, what’s a piece of advice you received early on that really shaped the way you think about Moth?

MM: While not an answer to your question, I want to first say that learning to relate to others’ opinions in a way that is constructive as opposed to confusing is something that took me a while to figure out for myself. I received a decent amount of advice from people more powerful than me in my first few years in Silicon Valley (mostly because of my Twitter) and while I was lucky to get the attention, it definitely made my head spin. I gradually learned to see advice as merely potent information about how the other person sees the world, which helped me take it much less personally. My goal in asking for advice now is usually in order to refine my internal model of the other person’s brain — the goal being that I could guess how they’d think through a given person/place/scenario without asking them. I like simulating other people’s perspectives in my mind and putting them in conversation with each other as a way of identifying blind spots in my own thinking.

A memorable piece of advice I received from my first LP was that: “the ideal investor is a finance bro with a dash of Engelbart.” While I didn’t change myself to become this, what I did take from this framing was that investors need to be commercially-minded no matter their stage, and that a dash of weirdness can be particularly beneficial at early-stage in order to attract other strange outlier people (hopefully some of them great founders). 
Another piece of advice I received from an early LP was to find a great coach who pulls from enneagram in order to better understand your own motivation and become more cognizant of your failure modes. I highly recommend doing this, especially if you’re embarking on anything solo and want to stick to something for a long time.

HW: How has your model changed between your first fund and Fund II (which I’m fortunate enough to be investing in)?

MM: My main learning from Fund I was that the area where I had the unique advantage was pre-seed rounds where I was one of the first checks in and investing with a deep understanding of the person’s potential to be venture-scale founder. The strategy of Fund II was designed around my spending as much time serving founders at this stage as possible, meaning I now write slightly larger checks and devote the majority of my investing time to building relationships with exceptional people who I think might one day start an interesting company.

More qualitatively, I’ve become much more shameless about Moth not being for everyone, while a perfect fit for the right founders (and LPs, you being one I feel especially fortunate to have on board!)

HW: Ok, something outside of work. Give me two places in San Francisco which you find delightful.

MM: I really like the Fort Mason area — strolling around the Sunday farmer’s market, getting a lemon ginger tea at The Interval, and eating sushi in the park as the sun sets.

Thanks Molly!

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Read while recovering from St Patrick’s celebrations

The Anti-Social Century [Derek Thompson/The Atlantic] – Is isolation a leading or lagging indication of breakdowns in community, political polarization, declining birthrates and other 21st century American challenges?

Men who watch television now spend seven hours in front of the TV for every hour they spend hanging out with somebody outside their home. The typical female pet owner spends more time actively engaged with her pet than she spends in face-to-face contact with friends of her own species. Since the early 2000s, the amount of time that Americans say they spend helping or caring for people outside their nuclear family has declined by more than a third.

Read it, preferably at a coffee shop, with a friend.

Stay Gold America [Jeff Atwood/Coding Horror] – Jeff’s a cofounder of Stack Overflow and writes here about an admirable decision his family has made: they’re going to give away half of their wealth to “long term efforts ensuring that all Americans continue to have access to the American Dream” such as Planned Parenthood, The Trevor Project, and other humanitarian organizations. Go go Jeff! Tech needs role models like this right now.

How I Used AI to Save My Life in 77 Prompts: A Debrief [Bethany Crystal/Hard Mode First] – My friend Bethany had an incredibly dangerous health scare which could have been much worse if she wasn’t a proactive, informed patient. She didn’t use Dr Google, but instead ChatGPT. She goes deep here on where and how it helped, the prompt chains, and the reaction of her medical care professionals. I

Thinking Through the Future for LLM Companies… and What This Means for B2B AI Startups [Sarah Tavel/Benchmark] – Sarah basically assumes the LLM platforms are going to evolve into competition for most of the B2B businesses built on top of them so she gives her best guess as to how to manage this as a challenger. You need either (a) a network effect, (b) proprietary or hard to access data, or (c) “execute like hell and land grab in an overlooked vertical.”

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“Be great at the job and proud of how you’re doing it.” That was our rallying cry at the beginning of Homebrew. We figured that if we enjoyed it, but weren’t financially successful, we couldn’t do it for the rest of our careers. And if we made money, but weren’t happy with the work, we wouldn’t do it for the rest of our careers. So why not focus on both. This extended to how we pitched LPs as well, aiming for a very concentrated base of institutional investors. We figured that given their commitment to the asset class, so long as we did our job well and treated them like partners in our business, they would show up each fund to back us. 

Years later Satya and I also started Screendoor alongside Homebrew. If Homebrew’s goals were to back exceptional founders building companies then you can think of Screendoor as backing exceptional founders building new venture firms. We’re now four years in, having invested in almost two dozen VCs, which by the way, if you’re raising a fund, let us know. Whereas Homebrew was always meant to be just the two of us, Screendoor is more expansive and now has a team of three running the show. 

One of the folks, Lisa Cawley (Screendoor’s Managing Director), recently published a blog post called “Work with your LPAC, not for your LPAC,” which got me thinking about Homebrew’s LPAC (Limited Partner Advisory Committee). Ours has always been small – just like our LP base in general – and we’ve worked with them in ways that are spelled out in our LPA (Limited Partnership Agreement) but also used them for advice, as the name suggests. Lisa’s post – and more coming – goes into depth about what an LPAC is and how it can be helpful for a VC, especially a new firm. To make it really tangible, here are examples of why we’ve gone to our LPAC over the 12+ years of Homebrew. 

Standard Asks/Approvals

• Extensions on fund length as needed – everyone knows it’s taking longer to get liquid. No reason to sell winners prematurely just because of original fund length, especially given our LPs are largely cash-on-cash return focused more than IRR. 
• Exceeding our limits on company concentration and recycling – we are aggressive in using early liquidity to get more turns on the dollars rather than distribute. We’ve hit 120%+ recycled in most of our funds, and have gone beyond our 10% concentration limit (per the LPA) in at least four investments. 
• Investing in a startup across funds – while we generally don’t want to do this (for various reasons), there was an occasion or two where it made sense. 

Situation Specific Guidance We’ve Asked About

• Taking early partial liquidity – Big believers in smart portfolio management and that for true seed funds, taking secondary liquidity is an important tool to be used. While this is now becoming more common, when we started exploring these opportunities it was a little more contrarian, or at least, not talked about publicly. We asked our LPAC about what frameworks they’ve seen across their venture portfolios. Not surprisingly there’s no one approach – some of their managers never sell ‘early’ while others had a rule of thumb to try and pull 1x the fund out of their ‘unicorns’ at each growth fundraise. Most encouraging was hearing from our LPAC that we should never feel pressure to sell prematurely just to create DPI ahead of larger gains. And that they trust our judgment since we knew more about the companies than they did. So nice to have longterm partners like that. 
• Living our values – A while back we encountered a situation where we felt that, despite our best attempts to provide an alternative, a portfolio company was making a decision that challenged our values. We sought some advice from other VC friends but ultimately wanted to do something no one recommended: sell our shares back to the company at our cost, despite an in-process financing occurring at a higher valuation. We shared this decision with our LPAC and again, received nothing but support from the LPs. 

Most of these have been ad hoc emails or phone calls, but we make sure to get our LPAC together each year as part of our AGM, usually in an informal lunch or discussion prior to the main presentation. They’ve been invaluable and we feel really fortunate to have a relationship that’s professionally oriented but also supported by care and personal affinity.

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I’m a believer in the ‘software eats the world‘ thesis, although I often change it to ‘software enables the world,’ which is not nearly as evocative but also not as consumptive. One byproduct of this movement, especially during the blitzscaling era, were new startups in areas such as finance, healthcare, housing, education, using venture capital to acquire customers at accelerated rates. And when these startups failed, the customers might find themselves confronting situations where a product they relied upon ceased to exist with very little notice.

For the investors it’s of course a disappointing outcome, but the failure is built into their model and they knew going in that ‘taking a zero’ was a potential ending – that’s why they’re ‘accredited investors.’ For the human being who is your using your service, quite often they don’t have the same visibility or understanding of the risks – there’s no such hurdle to make sure someone is an ‘accredited consumer.’

In the B2C world, especially when the startup is serving a the bottom of Maslow’s pyramid, a flameout ca leave you without a home, a therapist, or your savings. Because to some people on the org chart and on the cap table it’s better to use the last $500,000 to take one last growth hack swing than to manage a wind down.

I’ve said before this is one reason why we are very very careful about investing in addiction or mental health startups. As I wrote in 2021,

Which leads us to the fundamental difference between, say, a small self-funded online therapy practice and one that has taken millions of dollars in seed capital: the latter can acquire a larger number of patients much faster using investment dollars for both customer acquisition and to subsidize the economics of serving those clients. That’s what always gives me a little bit of pause in this particular area — the scale ahead of the sustainability

And some hopes,

Whether you’re the platform providing the therapy or the software powering the therapist, entrepreneurs in this area should have their own version of the Hippocratic Oath. What I’d ask the investors in these companies is that they share the same values. Push for responsible growth and make sure patients are well-served. Realize that when you look at stats that involve quality of customer interactions, drug prescriptions, etc you’re talking about real people, not just percentages. And perhaps most essential, have a plan for what happens if the company doesn’t succeed. What does client offboarding look like, how long would it take and how much would it cost?

This concept is top of mind for me because we are now seeing the potential for AI products to change the quality and economies of service for addiction and therapy once again. As a recent WSJ article highlights, “When There’s No School Counselor, There’s a Bot,” and one particular company trying to solve for a startling coverage gap in adolescent mental health

The hybrid chatbot is now available to more than 4,500 public middle and high school students in nine districts across the country, many of which are in low-income and rural areas where mental-health services are lacking. The American School Counselor Association recommends schools employ at least one counselor for every 250 students, but says the national average is one counselor for every 376 students. And 17% of high schools don’t have a counselor, according to the Education Department. 

This is great! And if you’re founding, building, or funding any of these companies please please please know that you are taking on a responsibility, not just an opportunity. I toast to your success and your efficacy. But know that your customers aren’t taking ‘startup risk,’ they just want some help.

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Screendoor has now looked at more than 1,500 venture firms raising funds, backing roughly 1.5% of them, often as their first or second largest investor. When I’m scanning a pitch deck I’m basically looking to put it into one of two buckets – Traditional or Different.

“Traditional But Better” means they are basically running a playbook which doesn’t appear too different from existing firms – sourcing companies in categories considered ‘venture scale,’ with a portfolio model that has consistent stage and ownership targets, and ‘value add’ that mirrors the language other firms might use. Of course Screendoor has an eye towards new VCs with identities, backgrounds and networks which are ADDITIVE to the venture ecosystem to better serve founders, so while the structure of the playbook is duplicative, the people running the playbook aren’t – and that’s the key. In these cases we’re asking ourselves, can this individual/partnership execute a ‘known’ playbook better than incumbents, because it’s not very interesting to put people in business who are going to be Traditional But Average. Mediocre VCs get wealthy themselves but they won’t make money for their LPs, and are, at best, just a WITHDRAWALS ATM for average startups.

“Different & Excellent” equates to something that doesn’t exactly look like other VCs. Could be pinning their thesis on a category of technology or type of founder that isn’t yet understood by the investment community. Or contrarian in the number of companies and/or dollars invested per company compared to their peers. Maybe even a strong POV on what value they can add that isn’t typically available to early stage founders. These firms aren’t carbon copies of anything else out there. In fact, they probably aren’t generally replicable. But they take advantage of their unique founding partners, very often the type of people who would reject – or not get hired by – ‘traditional VCs.’ Here we have to torture the models to really understand the quantitative sensitivities around expected performance. And how quickly the firm can process new information and adjust if portions of their hypothesis need tuning once in market. But we’re interested in taking this risk when the person and opportunity warrants it.

If you’re a VC raising your first fund, and you think you fit either of these descriptions, please let us know. I could even ask you directly which one of these you think you are and why.

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First, a piece of literary history. The phrase needle in a haystack is commonly credited to the book Don Quixote from the early 1600s (“needle is a bottle of hay”) but there’s also a Fujian proverb “To dive into the sea, to feel for a needle” that is thought to be even older and gets to the same point. The idea that it’s nearly fruitless to blindly search for a single small object when it’s located in a vast container.

Ok, back to the VC content marketing.

A few years back I helped start Screendoor, a fund that backs new venture firms by hopefully being one of their earliest and largest supporters. As a result I’ve seen hundreds of VC decks, all certain they will be among the top performers. Most strategies are some combination of innovation and best practices along the classic five steps of venture investing: See, Pick, Win, Service, Exit. This post is about ‘seeing.’

In addition to hustle and one’s existing network, I’m always interested in whether or not a ‘needle magnet’ is being built alongside the other efforts to find startups. What’s my needle magnet definition? Some force that pulls exceptional startups to you, directly or via intermediaries, in a privileged and sustainable fashion. What are, in my mind, some examples of needle magnet strategies that exist today?

Content Marketing of all Forms: Social media presence, podcasts, blog posts, How To manuals

Running Workshops and Other Experiential Programs/Events: On leadership, finding PMF, pricing and GTM, hiring, and so on

Humans Outside of the Firm With Incentive to Source For You: Scout Networks are Like Distributed Mini Magnets and we see all sorts of version here. People who can invest with the firms money at arms length, bounties for sourcing a startup, small investments in other VCs that are upstream from your firm.

and related, of increasing importance.

Data: Turn the needle magnet into needle radar, by pinpointing the location of the needles.

So my general advice is as you’re building a firm, think about which magnets feel right to you and start investing in them early. You’ll also need to tune the magnet over time so that it pulls less detritus – or at least build a great sorting filter so that you can kindly decline/exclude other stuff which gets pulled in.

Don’t be afraid to experiment, don’t be afraid to try something new – unless you’re really excited about podcasting and have a novel idea on how to break through the noise, it’s not worth doing. Pick the magnet strategies which are consistent with your brand, stage, resources, and temperament.

There, some loose thoughts on magnets. Did I miss any categories?

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Sometimes I write a post just to be able to send the URL to people when they ask me a specific question. This one is “what advice do you have for someone who is a new VC analyst or wants to join a firm at that level?”

If you’re joining a venture capital firm as a junior professional I’d recommend against being a generalist, or trying to get good at everything. Instead once you’ve gotten your bearings optimize on developing distinct super powers.

One super power that is in service of your GP. Assuming you’re working for a particular partner or a specific coverage team, pick something that is of great value to you partner and can be performed repeatedly. Maybe it’s around sourcing and depth within a particular network. Expertise in a technology platform. Or some data analysis competency. A tool you can build and maintain for the partnership. Something along the See, Pick, Win, Service, and Exit spectrum that creates value and is distinct from how any other person would approach the job.

The other super power should be in service of the founders you back. Pick something that is matched against the stage and markets you partner is investing in and just become the go-to person for the founders. Maybe you are just excellent at sourcing new grad engineering hires from your old school. Or running data analysis projects. Or whizbang at influencer marketing. It almost doesn’t matter what – it just needs to be high value, repeatable and welcome to come from the cap table (vs needs to live on the org chart).

Sure beyond these two items you will have responsibilities, and should have capacity, to spring into action for one-offs, or other jobs to be done. But I think a beachhead of value aligned against these two ‘customers’ will make you more valuable in specific ways and build your reputation versus just being ‘responsive’ and a ‘good guy.’

Of course YMMV – I’ve never hired or mentored a venture analyst – I’m just observing from my experiences working with founders and venture co-investors. Good luck!

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