Is Their Company Name a Core Value Or Marketing Spin

You learn a lot when buying a first home. I learned that there are principal agent issues with your realtor exacerbated by the transactional incentive model. I learned that disclosure statements can be worded in a very specific manner that doesn’t truly describe what happens to your basement during rainy season. And I learned that the origin of a neighborhood’s name will reveal whether or not it’s descriptively accurate. What do I mean by this last point? Well, right next to where I live is called ‘Sunnyside.’ If it was given this label by the land’s indigenous peoples then it almost certainly is sunny. But if it was coined ‘Sunnyside’ by the real estate industry you can assume it’s foggy AF. [spoiler, in my case it’s foggy]

Hearing a company’s brand name always brings me back to this point. Was it coined because the promise provides a true north to its identity? A goal for every employee to live up to every day when they think themselves as representing the organization? Or was it a feint? Something that reassures each time it’s spoken but with no actual deep roots. A plastic flower instead of a living blossom.

I think of this every time “OpenAI” is mentioned. And these days OpenAI is mentioned a lot! The technology betas released by this group have been some of the most compelling, exciting, and energizing experiences our industry has shared in years. And I applaud them for moving quickly towards ‘general availability’ (although one can assume that the usage data becomes its own moat). Their work has entered my Top 10 of personal “isn’t software amazing” moments. But I then pause and wonder about the name.

What does ‘Open’ aspire to in this case? In their 2015 introductory blog post, the group said

We’re hoping to grow OpenAI into such an institution. As a non-profit, our aim is to build value for everyone rather than shareholders. Researchers will be strongly encouraged to publish their work, whether as papers, blog posts, or code, and our patents (if any) will be shared with the world. We’ll freely collaborate with others across many institutions and expect to work with companies to research and deploy new technologies.

My assumption is that Open was juxtaposed against a potential future ‘owned’ (and siloed) by Google, Apple, etc and the promise was you needed a fundamentally different structure to support this noble goal. But three years later, the organization changed into a for-profit, albeit one with capped upside for investors (100x cap. gulp.). The rationale was that the costs of development — talent and especially processing capability — was going to be substantial and OpenAI would need millions and millions of dollars to achieve their technology goals.

Institutions like Sequoia and Khosla, among other VCs, piled in. This was my first moment of HMMMMM. Now I certainly believe it’s possible to do well and do good, but I’ve rarely seen a multibillion dollar VC who was willing to sacrifice ‘well’ for good. Especially when hundreds of millions of dollars (billions?!?) might be up for grabs. Voting structures aside (which I know is close kept to the non-profit Board), how do you prevent a handful of venture capitalists from influencing and benefitting from this organization. The company you keep does impact behaviors, no? Can any transition to a venture-financed for profit be truly Open? Is this a new model or just a new FAANG?

Then you have potential king-making decisions about their technology and their capital. OpenAI led a $23m+ round in an AI powered note taking app via a startup fund also powered by Microsoft (and other?) dollars. Of course they want to see startups experimenting with their technology, pushing it forward the use cases, getting input from the developer community. But is throwing money (and frankly the importance of their brand, which right now is red hot) into startups a lead investor really Open? How Open does that feel to other note taking apps? (I’m not an investor in anything related to OpenAI or Mem, nor have I attempted to invest in either, although I did meet Mem very early on and thought they were nice people).

I’ve only met Sam Altman once or twice but he is clearly intensely curious and interested in future forms of equitable distribution (UBI for example). Maybe that’s why I’ve got really high expectations for this project and am picking on them a bit here. OpenAI seems to really be kicking ass on the AI part of the name. They have a chance to be as special and unique with the Open half — setting new standards as well for how an organization like theirs can create amazing technology AND broadly inclusive outcomes.

Leading Funding Rounds Now Requires More Thematic Focus To See, Pick, Win & Service Startups

I’m going to make the case that early stage venture *firms* who want to lead seed/A Rounds can be generalists (in the sense they have a set of GPs who cover a broad set of areas collectively), but that as a VC you, now more than ever, need some degree of focus. This doesn’t mean every partner is so narrow as to invest in just a single type of startup. But it does mean that if you cannot articulate the handful of spaces you are trying to dominate (from an investment returns perspective), you are probably not going to succeed ongoing.

Why do I believe this is now a reality (and I didn’t necessarily when we started Homebrew a decade ago)?

• “Software eating the world” (or my take, “software enabling the world”) means the breadth of problems startups are solving, the range of markets they’re participating in, and specifics of what they’re trying to accomplish during their first few years of operations, are so diverse that you cannot credibly hold evaluative criteria in your head for all startups. You might invest as a generalist but I don’t believe your returns will outperform.
• Similarly, founders of these companies are looking for lead investors who can de-risk their path forward. Being a pure generalist VC makes it very difficult to convince savvy founders that you have the industry relationships, relevant pattern-matching, and density of experience to be their best lead investor. I think this remains true no matter how large your firm’s Operations team is, or how much of a celebrity VC you might be (although both of those can be selling points).
• We’re back in a phase where alpha seems to be coming from technical innovation (crypto, climate, biology, AI) and not just business model application (XYZ but a marketplace!). It’s not just that it takes time to understand these technologies but each of them bring their own new networks and talent to the forefront. You have to be *in* these networks to see the best early stage opportunity, not just wait for intros to land in your inbox.

I’m not the only one noticing this change. Look at First Round Capital’s recent announcement of hiring investment specialists in Health Care and AI.

while we’ve tended to apply a generalist lens to early-stage investing, when you take a step back, you don’t have to squint to see that our investments tend to cluster around a few key areas … we’ve approached the age-old question of whether to be specialists and generalists as a balancing act … But there’s no denying the value in specialized knowledge.

and finally the FRC transformation

we’ve naturally moved a few ticks closer to a more specialized approach over the last five years — especially as we’ve grown as a firm and added to our partnership.

So if you don’t believe me, at least listen to one of the firms that started seed VC 🙂

When Private Companies Take On Nation States

The eggs wouldn’t stay in my mouth. Reading this New Yorker article over breakfast left me gasping so often that whatever I was chewing needed to find another home. So what *is* quantum computing?

Classical computers speak in the language of bits, which take values of zero and one. Quantum computers, like the ones Google is building, use qubits, which can take a value of zero or one, and also a complex combination of zero and one at the same time. Qubits are thus exponentially more powerful than bits, able to perform calculations that normal bits can’t. But, because of this elemental change, everything must be redeveloped: the hardware, the software, the programming languages, and even programmers’ approach to problems.

Now I finally understand the Ant Man movies. But it gets crazier.

At the root of quantum-computing research is a scientific concept known as “quantum entanglement.” ​​Entanglement is to computing what nuclear fission was to explosives: a strange property of the subatomic world that could be harnessed to create technology of unprecedented power. If entanglement could be enacted at the scale of everyday objects, it would seem like a magic trick. Imagine that you and a friend flip two entangled quarters, without looking at the results. The outcome of the coin flips will be determined only when you peek at the coins. If you inspect your quarter, and see that it came up heads, your friend’s quarter will automatically come up tails. If your friend looks and sees that her quarter shows heads, your quarter will now show tails. This property holds true no matter how far you and your friend travel from each other. If you were to travel to Germany — or to Jupiter — and look at your quarter, your friend’s quarter would instantaneously reveal the opposite result.

Basically Amazon and Google (along with some other private companies) are investing big in this research. And so is China. EVERYTHING is a use case.

Quantum computers could be used to develop biodegradable plastics, or carbon-free aviation fuel. … “We have good reason to believe that a quantum computer would be able to efficiently simulate any process that occurs in nature,” Preskill wrote, a few years ago.

But of course there are also some VERY specific use cases of note.

A full-scale quantum computer could crack our current encryption protocols, essentially breaking the Internet.

Just an amazing read. We might be very far from this reality, or within a decade.

Ukrainians Can Destroy a Russian Tank For About The Price of a Nirvana Artifact.

One thing is for sure, I never should have tossed those hair metal concert relics and other memorabilia from my teens. You know, the ones that in the eras before social media you’d buy and wear to school the next day to show off that you were At The Thing.

[Sidenote, my first concert was 1985 Madonna ‘Like a Virgin’ tour w Beastie Boys opening. The t-shirt might have had that old school raised webbing on her bustier top]

“I can think of Nirvana shirts that I sold 15 years ago for $10 that are now worth anywhere between $1,000 and $5,000.” Pop culture clothing apparently has had its own run-up in price during the recent years. If you’re still straining to understand why these things are cool, think of them as NFTs you can wear.

I’ve been sharing the above linked FT article a lot because it’s so relatable to us of a certain age. Perhaps even more than ‘mom threw out my baseball cards!’ (most of which have plummeted in price anyway), almost every I know had some variety of this gear that got tossed, worn out, lost, or traded away. Most of my stuff is gone although I did manage to locate a Grateful Dead Giants Stadium (NJ) tie dye and a Poison tour short (unfortunately later era — by that I mean third album). So it was top of mind when I read about another object which costs just a few thousand dollars.

“War is an economy. It’s money,” said Graf, a stout, bearded Ukrainian soldier in charge of his unit’s drone team. “And if you have a drone for $3,000 and a grenade for $200, and you destroy a tank that costs $3 million, it’s very interesting.”

As the Russian invasion approaches its year anniversary the suffering inflicted is heartbreaking. But the resistance of Ukrainians, and their forced resourcefulness, is quite inspiring. The activities describe above are of course more commonly known as asymmetric warfare and practiced by all sorts of fighters, many of whom are more morally compromised than the men described in the Times article.

To get the grenade closer to the desired weight, his team has been using a 3-D printer to try to make a lightweight casing that can hold the explosives needed to penetrate a tank’s armor. The painstaking task involves experimenting with grenades of differing designs, clasped in a vise in their workroom, and operating around the explosive mechanisms to fine-tune them.

It’s just like my life, only if making an error in an Excel spreadsheet caused my laptop to combust with the force of a land mine.

This blog post doesn’t end with some grand statement of economic theory or judgment about a world where some fashionable people are wearing off the shoulder grunge nostalgia to brunch while others are shaving ounces off of a bomb.

Too Many Existing Companies Merely Delayed ‘Cash Out’ Dates Without Yet Changing Their Fates.

If 2022 was the year of the startup layoff, 2023 is going to be the year of the wind down. It will suck — for team members, for founders, for customers of these companies, and for their investors — but by the end of the year we’ll have gotten through the toughest part of the correction.

I wrote this paragraph because we’re all coming back to work after a holiday break and wanted to preemptively address one of the two questions that seem to be taking 5–10 minutes at the start of every meeting. (Regarding the second question: yes, it was a very nice time with family).

My POV isn’t derived from a sophisticated macro analysis of the financial markets since that’s not my specialty. And isn’t accompanied by any universally applicable strategy that all teams should follow. That’s not how early stage venture is done IMO — each company has its own reality and as investors we should service founders to their needs, not some overgeneralized advice. But asserting we’re heading for increased pace of closures comes from a few on-the-ground observations:

• 2022 Layoffs and cost cutting have preserved already raised capital but in a significant number of situations this has just kicked the ‘are we investable’ ball down the road.
• In 2023 there will be a number of Series A-D companies that cannot clear that bar. And not enough venture investors willing to provide ‘bridges to nowhere’ (low growth, middling margins, no natural acquirers, team attrition ongoing, and so on). Think of it this way: add up all the anticipated 2023/24 capital needs of existing startups not in the top 10% of performance. It’s going to be larger than the ‘dry powder’ private investors are allocating to deploy into second decile performers.
• And there’s still quite a bit of valuation compression that needs to occur in order to reconcile private marks with public stocks. This might not deter all venture investors, but it will deter crossover funds.

I say this all very much being a technology optimist. There are many startups accelerating their growth right now, and founding teams working on ideas that will become the next generation’s defining platforms. But as professional investors we can’t avoid responsibility for managing out the realities of our portfolios. If we avoid these conversations you have no hope of turning a company around, finding them the right home where the work can continue, or assisting executives with the stress and moral choices that come in a struggling business.

Founders in situations where profitability isn’t a near term strategy should be working with their VCs to understand Are There Milestones We Can Hit Where There’s More Capital Available To Us From Existing Investors and What Milestones Do We Need To Hit For Us to Attract New Venture Capital, while also building their own direct relationships (remaining fully dependent on your investors for access to capital markets is always a risk).

VCs should not be afraid to ask their portfolio CEOs whether the current plan gets them to an investable milestone, and are they Spending Existing Capital in a Manner Which Will Build Enterprise Value? In the cases where answer is no, we should not be afraid to try and revise the plan, or suggest that a soft landing or partial capital return is out of the question. Burning through millions of dollars with just fingers crossed rarely benefits anyone. Note, this is different than going down to the wire to try and execute an strategy which, if successful, does change the profile of the company (a big product release, a major customer win, a pricing change, etc etc).

Founders, make the toughest decisions early in this year. If you don’t have the energy left to pivot or cut to profitability, is there another leader at the company who can? Be willing to reset valuations now if the incoming capital is from a good faith partner and it gets you past the next 12–18 months.

2022 is done. 2023 shouldn’t be status quo.

Some link-blogging for the last Friday of the year. Enjoy!

1. The Strange Afterlife of George Carlin (NYT) — Dave Itzkoff

Certain types of humor can be timeless and Carlin, despite having died in 2008, gets recirculated for his incisiveness. Itzkoff looks at why both side of the political spectrum have embraced (some might say co-opted) the comedian’s takes. 

That Carlin’s work endures long after him is not only a testament to his talents; it’s a sign that his frustrations, which he expressed humorously but felt authentically, still resonate with audiences, and that the injustices he identified in American society persist to this day.

2. Vivid by Living Colour (Pitchfork) — Stuart Berman

Thirty four years since its release, the lapsed time provides a perspective on Living Colour’s debut album that wasn’t available to critics in the moment. And it has aged well. 

It’s [“Cult of Personality”] one of rock’s greatest Side 1/Track 1 opening salvos. But given that rock radio was still pumping out pop-metal trifles like Winger’s “Seventeen” and Poison’s “Nothing But a Good Time” in 1988, it’s easy to understand why Vivid’s mainstream incursion moved in slow motion.

3. NFT Tax Loss Harvesting

What to do with those NFTs that you bought at the height of recent mania? The doodles and GANpuke that were going to usher in enlightened decentralized ownership and access to communities? Most people are self-HODLs, because there’s no buyer, no market and no reason to sell. But if you wanted to try and unload them for huge losses in hopes of taking a take write-off, well, there are services to help you. Warning it might not be as easy here in the US. 

4. Whatever Happened To… 

Friends Star Matthew Perry (GQ, Chris Heath)

Movie Actor Brendan Fraser (GQ, Zach Baron)

Two amazing profiles, each with their own types of pain. 

5. The Troubled Investments VC Firms Tried to Erase (The Information)— Kate Clark

If a tree falls in the woods and no one is around to hear it, does it make a sound? Kate Clark covers some examples of investors not just disappearing a startup logo from their website, but removing over-the-top blog posts and other ‘we’re proud to have backed…’ tributes when it turns out that maybe they should have been so proud.

I’m of two minds on this (and appreciate the media holding us accountable). On one hand these websites are marketing vehicles, not newspapers of record. So if you think of it as a storefront and not the New York Times, well of course you’re going to rotate the merchandise and present yourself in the best light. That said, on some of these blog posts I wish that they’d preserve them (even if they remove the active link from the site itself) and write a ‘correction’ intro that talks a bit about what they learned from the failure. That would be really impressive introspection. 

Why Investing Our Savings Instead of Other People’s Money Let Us Rethink What Venture Capital PMF Looks Like in the Decade Ahead. [Part Two]

According to the physical rules of aviation, there is no way that a bee should be able to fly, but it doesn’t know that, so it does. The same can be said of startups and their founders, in the sense that so many things can go wrong in the building of a company to an exit, that success almost seems to be a statistical anomaly [more on how bees fly]. Homebrew has invested in well over 100 seed stage startups this past decade, in most of them working closely with the founders and early team during their first several years. In other words, we’ve seen lots of bees fly. But, and I’m really belaboring the metaphor here, we also saw the venture industry move from bespoke beekeeping where the two parties are lovingly tied to one another, to industrial scale honey production.

Confronted with this evolution we made a decision to change Homebrew. Pushing aside, for the time being, ownership targets, institutional venture models and other people’s money.

In other words, Satya and I wanted to maximize our time with the bees themselves, not the size of our beehive and support systems necessary to prioritize scale.

We announced this change publicly (aka Homebrew Forever) in February and spent all of 2022 in this mode, revisiting, and in some cases revising, our core assumptions about venture capital. In other words, we started revisiting what PMF looked like after a proactive pivot. There’s lots and lots of institutional capital out there, much participating in its own self-commoditization (a whole separate post). There’s also many wonderful angel/operators and smaller supporting funds with large portfolio strategies.

What there isn’t a whole lot of: Early stage investors with institutional lead check experience (and a small support team, large networks, etc), who are investing their own capital, in a flexible manner, and then working post-investment to provide additional ongoing support. This is Homebrew Forever.

Why aren’t there many of these? Because like the bee, it breaks knows rules. If you’re good at this job you want to get more and more AUM under management (probably even more true if you’re bad at this job! 🙂 ) . If you’re good at this job, when you stop doing it at a firm, you shift into lifestyle mode, or become a solo angel. But no one told us we couldn’t do this, so we’re doing it! Go go MF’ing flying bee!

So how is it going? Encouraging, and working at a ‘first principles’ level but to be honest, still in evolution. If you think of venture capital is an oversimplified “See” -> “Pick” -> “Win” -> “Support” model, this would be my snapshot for HB♾️ (how I lovingly abbreviate Homebrew Forever)

See: Best summarized by the following list of ‘referral sources’

Cold Inbound: Steady (which is good — we see a lot)

Cold Outbound: Slight increase (we’re trying to do more of this now but still retuning our processes)

Angels: Steady, but we need to continue creating relationships with new angels

Seed Funds that write non-lead checks: Down by ~50%. We still see a ton of collaboration with the funds we’re closest with, but others have definitely taken us off their list with our model change. Not for competitive reasons (I don’t believe) but because they are primarily trying to help a startup find a lead investor, and we used to be that for them, but now rarely lead seed rounds. So they might like us, think we’re useful to companies, etc but their ‘job to be done’ is to find a lead because that closes the round -AND- helps secure their allocation.

Previously ‘Competitive’ Seed Funds and Multistage Funds: Up by 100%. So this is the other side of the coin from above. The funds we were always friends with but where our shared ownership goals made co-leading seed rounds fairly unlikely are now much more likely to share opportunities with us (and us with them). And the larger multistage funds who would normally lead A rounds for our portfolio but where there wasn’t much collaboration with their seed practices, well, that’s switched too. What I’ll emphasize here is that we don’t seek out FIRMS, we seek our GPs. That’s to say, there are ~24 or so GPs spread across an almost equal number of firms that I just LOVE to work with on cap tables, and I’m targeting them like a thirsty multichannel marketer.

Overall I’m happy with 2022 opportunity flow but we’re not even close to the performance ceiling and have a bunch of work in 2023 to improve.

Pick: Obviously it will be many years before we know the financial outcomes of our ‘picks’ but if the goal of HB♾️ was to be 100% focused on the simplicity of ‘do we want to work with these founders,’ I’m happy with our picking. We didn’t become too cautious using our own capital, nor did we become too undisciplined. We ended up making 11 investments in 2022, which historically has been our average independent of strategy.

Win: 11 offers made, 11 offers accepted. The ‘sacrifice’ we made to achieve this win rate is of course we’re now predominantly deploying six figure checks instead of seven figure ones (we did one new investment greater than $1m and brought in some friends on that one for a seed SPV), but that’s the goal here anyway. Bespoke beekeeping instead of agribusiness, remember?

Side note: I did get ghosted by an entrepreneur on a potential personal angel deal and that stung (bee pun!) because it was someone I’ve lightly known for a while, he asked me early for help/advice, acknowledged that when he raised money I’d like to angel, then stopped returning communications once the round finalized. See, it happens to investors too, not just founders.

Support: Homebrew tries to be a force multiplier for founders, which compounds over time, improving their probability of building the best version of what their company could become. Neither Satya or I would continue doing this work if we were turned into passive investors, no matter the financial success.

As now a non-lead investor we have to simultaneously remind the founders (and lead VC) that we can be quite useful to them, while also not creating additional management overhead. In our move to HB♾️ we re-wrote our onboarding guide and process, and made other tactical changes to how we build trust and context with the founders we back. I’d call it a work-in-progress — we’re almost certainly ‘hitting above our ownership weight’ but that’s enough for us, and not yet reliably reached quickly and uniformly across the new portfolio. Another place for experiments and improvements in 2023.

so tldr, we’re happy at the day-to-day level but working on the higher level product and go-to-market with a sense of urgency to turn ‘good’ to ‘great.’ Just like many of the startups we’re fortunate to support!

When Homebrew Started Investing Its Own Money, The Reaction From Our Venture Capital Peers Surprised Me [Part One]

During the last several years venture firms approached fundraising like trips to an All-You-Can Eat buffet: fast, frequent, and without regards for the digestive impact. As they piled more LPs into more fund vehicles, and then deployed that capital faster than ever, it’s not a surprise that everyone involved is now dealing with the after-effects of a decade-long gorge.

Homebrew was born at the beginning of 2013, and grew itself modestly during the bull market that stretched into 2022. But ahead of the correction we decided to pull forward a goal we’d always dreamed of: going self-funded. That is, instead of primarily investing other people’s money into startups, invest our own. We’d still stay ‘Homebrew’ and keep the same team, but adjusted our strategy to better suit the new strategy. Instead of seeking to own 10–15% of a startup, we’d remove our ownership target and just focus on ‘do we all want to work together.’ And instead of an average check size approaching $2m, we’d scale back to mostly $100k-$500k (~20% of the time larger), in order to make it easier to fit into any round (also owing to the limitations of our bank accounts). For me and my partner Satya this was about creating a sustainable model where we can optimize for working with *any* company at *any* stage, albeit still hopefully as early as possible. So we made the decision in Fall 2021, began investing this way in January, and started talking about it publicly in March. Just as the markets collapsed! Correlation or causation? 🙂 Anyhow, the choice we made was more about to starting to experiment with new approaches to venture rather than embracing or rejecting any single playbook.

The volume of reactions from our industry peers surprised me— notes, conversations, backchannels and so on. Truly I didn’t think people would really care. I mean, we’re a small fund among lots of other firms! Homebrew became either a projection for people’s own frustrations with the venture model or a ‘true north’ for others who were considering similar evolutions but had something blocking them.

A) “Oh it must be so nice to not [x]”

Lots of comments directed our way that were really more just reflections on what the other person’s priorities rather than our own.

“Oh must be nice to not deal with LPs any longer!!!” Not at all. We have a small group of institutional LPs that we really love being in business with, maintain close ongoing relationships with via Homebrew I, II, III (plus Screendoor), and have mutually left the door open to figure out how to put their capital to work together going forward.

“Oh must be nice to retire!” Actually we’re still working the same amount (with some changes in the what and how — that’s coming in Part 2 of this post).

“Oh must be nice to be that rich!” Obviously you need to have banked some dollars, but this comment often came from people who, at least on the surface, live grander lives than I do. What we chose to give up was a bunch of future management fees, etc and then to go into pocket for a few years of investment capital (believing after that carry from earlier Homebrew funds would be recycled into our new model). What we actually might be is more risk seeking.

B) “I want to do this but…”

The most touching conversations were those with other VCs who shared some version of “I want to do this but I don’t have a Satya” [ie it’s lonely to do this by yourself] and “Me and one of my partners want to do this but if we left our firm it would break our commitment to the remaining GPs/hurt the fund.” Turns out there’s a meaningful number of folks who are conflicted about their firm’s growth and want to get back to smaller, personal investing, but are choosing to prioritize their exiting relationships (some with a firm plan to step down after next fund, others with a more noncommittal timeline).

In hindsight I guess I’m glad that people cared. Not because it reflected anything about our place in the industry but rather it showed me there are peers who also want to break out of venture’s self-commoditizing treadmill and create their own models.

In Part Two, I’ll reflect on what we got right and what we are still working on….

Casey Newton’s Deep Skepticism Of Twitter Replacements & Getting More Comfortable With Substack’s 10% Take Rate

My daughter knows Casey Newton as the ‘watch pro wrestling and eat chicken wings’ friend. She is not wrong. But beyond the bond of those shared pleasures, we also have a long — and mostly agreeable — relationship rooted in his coverage of the technology community and my participation in said industry. When I last interviewed Casey, back in 2017, he recognized there’s a “natural, & healthy, tension between myself & the people I write about.” So with that context, here’s another FIVE QUESTIONS with Casey Newton.

Hunter Walk: Hi Casey and welcome back. I think you’re the first person I’ve interviewed twice on this blog. The biggest personal change since our 2017 discussion is your founding of the tech newsletter Platformer (which everyone should subscribe to). Ahead of its launch we’d spoken quite a bit privately about going indie and I’m so glad you took that path. In hindsight what did you underestimate and what did you overestimate in terms of initial challenges?

Casey Newton: This is kind of a dodge, but the truth is that the launch went mostly to plan. I had the benefit of a big mailing list that I took with me, and so when I turned on payments Platformer was ramen-profitable basically from day one. It took me about six months to climb back to my old Verge salary, and right after that I launched my Discord with some other writers and that led to a big spike in revenue. Most of the discourse around independent journalism centers on how hard it is, and leaving my old perch was certainly scary, but in the end it worked out great.

I mean, there were many small annoyances along the way — finding a bookkeeper, and an accountant, and interacting with the California Franchise Tax Board, to which I always seem to owe some amount of money no matter how many times I’ve paid my bills. And I did find myself missing the feeling of being in a newsroom from time to time, though I continued to have access to The Verge’s slack as a contributor and that helped me feel less lonely.

Often when people ask me how Platformer going, there’s an edge of fear in their voice, as if they expect me to say that I’m barely holding on. But recently I hired my first employee, so I’m hoping some of that dissipates.

HW: In our previous discussion you talked about measuring journalistic success in two ways: impact and audience. Is that still how you think of your job?

CN: Those are still the two biggest ways. But increasingly I’m thinking about measuring success in terms of sustainability and expansion.

In recent weeks, we’ve seen layoffs at Gannett and the Washington Post, and Protocol shut down completely. Those journalists aren’t losing their jobs because their work isn’t valuable — it’s because they’re chained to unsustainable cost structures.

Platformer is designed to weather a lot of the storms that my previous employers got caught up in — downturns in the ad market, the rise of a buzzy new social app, or pressure from investors can’t really trip us up. (We don’t currently have ads or investors.) We just have several thousand paying customers who like what we do, and that number is up 50 percent year over year.

Our number of subscribers could stay flat or even decline precipitously and we could keep doing the journalism we’re doing indefinitely. And speaking for myself — I probably would!

Anyway, “continuing to operate” might sound like a low bar, but the longer I stay in media the prouder I am of the fact that we have.

The other measure I have now is my ability to fund more journalism through hiring. Earlier this year I brought on the great Zoe Schiffer as managing editor, and in just a couple months she has helped us break scoop after scoop.

I never want Platformer to grow bigger than a handful of people. But the fact that Platformer readers are now supporting multiple journalists in their work is a milestone I’m proud of.

HW: Substack, which you use for Platformer, says to not think of them as a newsletter company, but more broadly as part of a creator oriented shift in media. As one of their valued customers, what do you want from them in the future? Before you started Platformer we debated whether their 10% cut would force you at some point to seek cheaper alternatives. How do you think about that value prop now?

CN: I feel better about the 10 percent than I used to. In part this is because I write about platforms like Apple and Meta that insist on taking 30 percent; or YouTube, which takes 45. If nothing else Substack is cheap by comparison.

Another reason I feel better about it is because the company figured out an actual growth mechanism this year: when you subscribe to my newsletter, Substack will show you three of the other publications I recommend and invite you to subscribe to those as well.

When Substack introduced this feature on April 12, we had 57,135 free subs. As I write this eight months later, we’re about to hit 100K.

So that’s the good news. The bad news is that these subscribers don’t really convert to paid. But still, lots of them do open the newsletter, and eventually I suspect Substack will start an ad network, split the ad revenue with us, and the 10 percent fee hurts even less.

All that said, it continues to be strange that the better you do for Substack, the more expensive it gets. There aren’t many businesses like that, and I would like to see them offer more perks to top writers over time.

HW: Let’s talk Twitter, with an old school Newsweek-style Conventional Wisdom, up down sideways

CN:

Twitter 2.0 ⬇️ This company generated $5 billion in revenue last year. Within two weeks Elon Musk was telling the new team the company might go bankrupt. Twitter has always had problems, but now it’s in crisis, and its CEO has consistently made the wrong decision after being presented with the right one.

Elon Musk ⬇️ I had basically no opinion about the guy before he took over the bird app. But then I started talking to all the people whose lives were suddenly in upheaval thanks to his various layoffs and purges, and my opinion of him lowered significantly.

Jack Dorsey ⬇️

‘Free Speech’ ⬆️ People mean a lot of different things by this, but at the very least I think we’re having a louder public conversation about the importance of free expression than we’ve had in a long while, and I do think that’s good for us in some ways.

Verification ⬆️ If you ever wondered why platforms should verify some users — and very much not verify others — boy have you gotten a great lesson in that over the past few weeks.

Mastodon/Post/Etc ⬇️ Dead on arrival. I’m still waiting to see the first good Mastodon post. God help us.

HW: One other update from the last five years is you’re part of an improv comedy troupe! Talk about that here and plug where people can see you perform.

CN: A few years back I realized that I didn’t have a good answer to the question “what’s going on outside work?” I am a giant ham, and so my roommate at the time suggested I try improv. I went to a class and never looked back.

We organize shows roughly every six weeks in San Francisco, and recently started performing with another troupe that’s scary good. (We bring in a stand-up as well, and something I’m really proud of is that we pay them for their work!) Some folks have come to see us a dozen or more times.

Before I moved to San Francisco I fell in love with the city because there was so much weird, fun, funny stuff in the city that you could just stumble across if you walked far enough. Doing these improv shows is my little way of building the San Francisco I want to live in.

The best way to find out what we’re up to is by following our Instagram!

Thanks Casey! If you’re not doing so already, please subscribe to Platformer.

Timestamp: May 1, 2022