What’s To Stop Twitter’s New Owner From Publishing The Company’s Historical Internal Emails?

Selective Leaks of Previous Discussions & Policy Debates In The Name of ‘Transparency’ Would Put Twitter Employees At Risk

Typing “I know this makes me sound like a crazy person but..” as a blog post opener is usually a good reason to close my browser window and take a walk. But hey, it’s 2022, let’s soldier onward…

Since it was announced that Twitter’s Board of Directors and Elon Musk had reached an agreement to pursue a sale of the company there’s been a lot of speculation about how the service could change under his ownership.

Personally I’ve been upfront about my distaste for his style of abusive shitposting, impressed by his will to get things done, and saddened by the lack of vigor from Twitter’s Board and C-suite.

But I believe in capitalism and the will of markets, so if Elon ends up as owner I’m not going to cry liberal tears and close my account ASAP, I’m just going to shrug and see how things do. I’ve already changed my relationship with the service earlier in the pandemic, removing 98% of the accounts I’d previously followed and, as a result, spending much less time letting other people insert themselves into my day. However as the press covers Musk’s antics and speculates what the company’s content policies could be going forward to fit one person’s mutated version of ‘free speech,’ there’s another concern that’s not getting enough attention IMO: what’s about to happen to Twitter employees.

No, not their stock options or employment (job cuts are almost certainly coming but we’re in a robust market for talent and I’m assuming there are already many folks proactively looking for new opportunities), but the internal communications that sit within HQ. Namely, the years of emails and documents that detail debates over policy and legal stances. The chance of these getting selectively leaked by a new owner (or their proxy cutouts) just went up.

Get prepared for what looks like ‘embarrassing’ revelations around off the record chats, correspondence with politicians, poorly phrased questions or suggestions, and even an exploration of possible policy outcomes that seems biased. Yes friends, TwikiLeaks is looming.

Remember Musk has his family office manager use a pseudonym to hire a private investigator to dig up invented pedo dirt on someone who challenged him.

And is grossly slamming Twitter legal and trust & safety executives.

You don’t think publishing some “skeletons in the closet” in the name of transparency is beneath him or his hangers on? Like I said at the beginning, I know this makes me sound like a crazy person….

If I worked at Twitter I’d be using the next few months (the deal is still pending) to reduce my PII footprint, change passwords/2FA accounts and so on. Oh, and Twitter management should offer something like Tall Poppy as a benefit.

Look, maybe I’m overreacting and this would be beyond the pale for the new owner or team, who do need to keep the service running as a business (or at least I think he does, who knows). But the chance of something like this happening just went up and last time we had Pizzagate as an outcome.

What Was The First Concert You Attended?

Madonna, Like a Virgin Tour, June 1985

We recently took our daughter to her first concert, delayed somewhat by, you know, that COVID thing. It was Billie Eilish at the Chase Center a few weeks back. Good show. I’m glad my kid had enough taste to pick an artist that she likely will look back on with fondness.

Part of the fun in watching all the girls rock out to Billie was remembering my own ‘first time.’ Appropriately enough it was Madonna’s Like a Virgin tour in 1985. Radio City Music Hall in NYC. Which wasn’t her hometown technically (Madonna grew up in Michigan) but very much her adopted city, having become a part of the scene beginning in 1978 when she dropped out of college and relocated to the East Village with $35 in her pocket. She’s still in and out of the city — at least one residence I know of, a triple wide townhouse on East 81st.

Madonna played three nights at Radio City that June before moving on to Madison Square Garden. I don’t recall which night we went, but my mother took my and my sister. June 1995 meant I was 11 years old. My sister was six.

I hadn’t heard of the opening band, some local group called the Beastie Boys, but they weren’t very good and people booed. Of course just about 18 months later they’d release an album that became very important to me and begin a multi-decade fandom. But that night the crowd was there for Madonna.

AND SHE SPANKED! I mean, it’s hard to remember how on fire she was at this time. There’s something about an artist at the height of their initial debut. Madonna was a cultural phenomena, a performer who inspired adoration, debate, fashion, outrage. Of course she’s reinvent herself multiple times but for my generation, the Material Girl era was the lasting image.

Do kids still buy t-shirts at concerts to wear to school the next day as ‘proof’ or is that no longer cool? My daughter wears a uniform, and the cool Billie Eilish merch drops on the web, so I’m out of touch with what you’re supposed to do today. She bought a tour poster (now framed and hanging in her bedroom) and a keychain, because her school says you can put one piece of minor flair on your backpack.

I bought THE t-shirt back then.

It said “VIRGIN” in big letters on the back. The bustier was like that rubbery print on material. Maybe it glowed in the dark or that was probably just my hope. I’m sure this shirt is now like hundreds of dollars on ebay and trendy LA stores.

Since that time I’ve seen hundreds of shows. I really do love live music. But seeing an iconic performer on a seminal tour as a first shot sets the tone.

So, what was your first concert?

Keep Your Personal Burn Rate Low To Maximize Your Options

Why ‘Living Below Your Means’ Is One Key To Success & Happiness

$0 per year. That’s what my business partner and I decided that we wanted in salary from our newest venture fund. Or at least it was the resulting impact of declining to take additional capital from our investors and commit our own dollars instead. Now, my salary doesn’t go to zero overnight because we’re still drawing down historical management fees but it’s all downhill from here as those income streams taper and end.

Many of my industry colleagues shared that they too would like to pursue the model we chose but they didn’t have the capacity to do so yet. In many cases this was kind of a bullshit answer to be honest. What they really meant was that they enjoyed a lifestyle that was built around fees in addition to profit sharing, had a high personal burn rate, and were risk averse to putting more of their capital in the game. It might seem like I’m shitting on those folks, but actually it’s perfectly sane set of decisions (VCs are generally risk averse, that’s why they’re usually not founders)! But these same folks should be honest with themselves about their priorities because if they wanted to do what Satya and I did, they could!

It all brings me back to Sam Altman’s tweet from a few years back:

Look, I realize this whole post is about rarified air — I’m not talking about the majority of the population who aren’t afforded these ‘decisions’ and who deserve more of a social safety net (including childcare!) so they can make longterm decisions that improve their lives. But I am aiming at early career tech workers and mid career executives who tell me they want to join a startup but are addicted to that FAANG salary+bonus+RSU. Again, nothing wrong with this career path if you want. The surest way to become a millionaire is to join Google and stay there for a decade.

But if you want to prioritize the act of starting a company, or impacting an early one in a big way, you should expect to take a near-term pay cut. It’s no longer always ramen-levels (many early stage startups pay 50th-80th percentile of BigCo tech salaries — FAANG pay multiples of this), but if you can’t imagine earning less for a few years to make more later, then realize you’re limiting your choices.

Low burn rate isn’t just about being able to leave a higher paying job it also lets you walk away from a bad employment situation in general— the freedom to quit a shitty company.

Nice things are nice. Life should be enjoyed in ways that are meaningful to you. But the more you spend on rents, mortgages, lifestyles, etc the more wedded you are to choices you made in the past and not options you want to preserve for the future.

A Good Investor Can Help You Close Candidates. A Great Investor Will Sometimes Tell You Who Not To Hire.

For Early Stage Startups, You Need Employees To Choose The Company. Not The Other Way Around.

I love helping startups hire, especially early on. Look, companies don’t exist without founders — often when we write our initial investment checks there aren’t any employees — but nothing amazing happens without a team. I’d go even further and suggest that if I could access just a single predictive signal after we’ve made an investment of whether the company has a chance to be successful it would be something to the effect of, “show me the first 20 people on the team.” Not the product, not the buzz, not the sales numbers. The people. Because en masse, smart ambitious talented thoughtful human beings are the best prediction model, especially when they vote with their feet.

Ultimately building a hiring brand and motion is the job of the founders, but investors can help a lot. When we spun up Homebrew, our first operating hire was a Head of Talent (Beth Scheer) because we knew that it made sense to bring an expert on board. And then personally, Satya and I also get involved in supporting founders as they start ramping up the growth efforts. Personally, one of my favorite activities is speaking with a candidate during the latter half of the process, when they already have an offer or are getting close to receiving one. I tell the companies I back that it’s an inexhaustible resource — don’t save it just for executive hires. If there’s anyone you think needs or wants to hear from an investor before committing to the company, you intro us and I’ll get it scheduled ASAP. One caveat though, I won’t tell potential employees just what they want to hear. And if I think it’s a bad hire, I’ll tell the founders and ask them to engage with me on those concerns to make sure it’s been thought through, or referenced, or something to keep an eye on once they join. It’s ultimately the founders’ decision on who to hire, but you don’t take my money for me to just be cheerleader. You take my money because you think we can be additive from outside the org chart.

Yeah, so these “sell” calls/coffees/meetings. I actually don’t think my job is to sell, at least not to sell them something they don’t want. Especially early on it does neither party any good to bait and switch a new hire. You gotta understand why and how they’re making their decision and then engage honestly to supply your POV and answer their questions.

I begin every candidate discussion with two commitments:

First, I tell them that while obviously I’m incredibly enthusiastic about this startup, that I believe people choose companies, not the other way around. And so I consider this opportunity my chance to give them more data and perspective they need to make that decision. But that I won’t tell them just what I think they want to hear, because then I’d lose their trust and they wouldn’t stay long at the company anyhow.

Second, I emphasize that although I’m going to loop back with the founders to let them know we spoke, and provide my general impressions of the conversation, that I’m happy to keep anything confidential. That is, don’t worry about how you phrase a specific question or a topic that might be sensitive. Because anything unspoken is usually an impediment to a good decision.

From there I give a bit of my background with the company to level-set. Then we open up to specific questions the candidate might have. I try to close by understanding where the individual actually is in their decision, and what they still feel like they need to do. And I repeat back to them why I think the company could be a good fit for them (based on our conversation), if I truly believe it’s the case.

Does this all take time and energy? Of course. But I do believe when done correctly, it’s one of the pivotal roles an early stage investor can play for the founders they’ve backed.

It’s Pretty Cringey To Self-Anoint Yourself Any of These Four

Let Others Call You a “Platform,” “Mentor,” “Low Maintenance,” & “Good in Bed,” Never Claim Them

Tall. I can call myself tall. It’s objectively true because I’m 6′ 3″. Sometimes I just joke that I’m ‘tall for tech’ but either way, I’m higher up than average. But there are some things I feel like I can’t just claim about myself. “Easy to work with?” That’s really not for me to judge, you’d need to ask my Homebrew partner Satya Patel. Or the founders we back. But there are four things especially cringey to say about yourself because they *only* matter when they’re said by others.

“We’re a Platform”

Whenever I hear a startup, especially one that’s just launched, declare itself a ‘platform’ I’m like nah, at best you have platform-aspirations. True platforms have more than just webhooks and APIs and partner programs. They have an ecosystem. They have created value for others. They have stable and predictable relationships with those who rely on them. Has any tech company ever just said “We hope to become worthy of being called a platform, but really that’s up to the people who will grow with us. And our job is to attract them, inspire them, support them. We hope *they* will call us a platform.” Someone should.

“I’m their Mentor”

Anything I can write here is going to fail to be as influential as just pointing out there’s literally a Seinfeld episode making fun of “mentors.” Don’t say you’re someone’s mentor; let them say it about you. “But Hunter, by saying I’m someone’s mentor it’s actually a vouch for them,” you insist, “It’s showing they are impressive enough that I’m dedicated to them in a non-casual manner.” Ok, maybe, I can buy this interpretation a little bit, but let me tell you, most people won’t get this. And it risks aggrandizing you and lessening this person you suggest you care about. Let them do it, not you.

Before I move on I guess it’s also fair to caveat this one by saying I refuse to be someone’s mentor nor do I want to be mentored by anyone. I love helping people and guiding them. I have my own role models from whom I seek ongoing help. So if you feel like you’re one of my mentors and I’ve just never called you that, know that I appreciate your care, I’m just not going to say it.

“I’m Low Maintenance”

Has ANYONE who said this within the first 24 hours of meeting you every actually been low maintenance? No! It’s like the biggest neon warning sign appears above their head, with a HUGE blinking arrow pointing down to their head, and giant “NO HE’S NOT” script font arcing through the air.

“Wow, you were pretty easy to work with,” seems like it does require another party to validate. And it probably should be said *after* you work together, not before. And maybe even only applied situationally until enough time has passed to prove that yes you are chill generally, not just when things are going well or when you have the power or when it’s sunny outside.

“I’m Good in Bed”

I Love Backing ‘Mission-Driven’ Founders But Here’s Where They Can Struggle as Startup CEOs

Learnings From a Decade Investing In These Types of Leaders

We’ve sent hundreds of millions of dollars to startup bank accounts but none of those have gone to teams which don’t have at least one founder we consider to be ‘mission-driven.’ How do I define that term? Loosely, someone who has a personal connection to the problem they’re trying to solve. The tie is sometimes very intimate (as an individual, familial, and so on). Or linked to what they’ve studied (academic) or worked on previously (vocational). They’ve often been thinking about it deeply ahead of even understanding whether it could be a startup or would be an attractive, valuable issue to address. Not everyone on the founding team needs to fit this criteria but we do try to understand the different motivations at an individual level.

But I’ll tell you, my experience suggests that mission-driven founders also have some hurdles to becoming great leaders and CEOs. Their challenges are not exclusively felt by people with their motivational DNA, but 10 years of venture investing, seeing thousands and thousands of startups, does suggest, at least anecdotally, that mission-driven founders more often experience the following challenges:

  1.           Assumption That Everyone ‘Understands’ The Problem Like You Do

When a founder has been thinking about a problem space for a very long time they sometimes lose the ‘beginner’s mind.’ They assume that everyone else sees the issue in the same way, with the same amount of depth and can make leaps of logic on their own. But this isn’t true! Most people the founder encounters will have no idea, or just surface level understanding! And then even when given a short background, won’t make all the connections between the problem at hand, the urgency and why the startup is necessary in order to solve.

So the mission-driven CEO sometimes gets frustrated that the other person ‘just doesn’t get it’ or feels like their assessment of the problem’s severity and importance is being challenged/disregarded. Or the other person will respond enthusiastically and the founder assumes that they understand everything about it — as if there was some mind meld — and then disengages, assuming the other party is now bought in, or knows what to do next. Not so!

(I’m contrasting this with founders who have more recently or opportunistically come to a problem space. Curiously they are actually often better at explaining the nearterm roadmap and rationale for funding than their peers. Because they just went through that introspection themselves!)

The advice I give mission-driven founders in this area are: don’t assume everyone understands or cares as much as you do. Lead people through the logic behind your statements, not just your conclusions. And that over-communication will be required ongoing, more than you’d expect, because your team will be a set of people with different types of exposure or interest in the core fundamental problem you’re solving.

2. Too Reliant Upon Belief, Not Enough Trust In Data

Mission-driven founders are more predisposed to ‘sticking with the original plan’ than more opportunistic leaders. Their conviction stems from purity of conviction and belief that deviating from the path holds too much risk in compromising the vision. Or that the ‘data’ just shows the current state of the world and they have the ability to change the world to get pulled towards them, versus having to accommodate reality.

These are amazing and durable traits to hold as a CEO. They inspire me to also believe you can change the world. But almost no one’s original plan ends up being the right one. You can be correct about the destination and flexible with how you get there.

Fortunately these biases aren’t fatal if you can recognize your blindspots, steelman your own arguments and/or trust other voices on your team to give you a read of the data. Someone who suggests the current plan won’t work isn’t necessarily a ‘hater,’ they may just be looking at the available information with a POV with a less emotionally pre-commited perspective!

3. Hire Too Slowly Because of Mission Purity Tests

This one might be a little controversial, but I don’t believe it’s important for everyone at your company to care about the problem being solved for the same reasons or to the same degree of urgency. Screen out people who are dismissive, brutally apathetic or, even worse, cynical about what you are building (strangely enough, folks like this apply, especially when a company becomes ‘hot’), but not everyone, in every function brings the same motivations. Sometimes it’s more about who they are working with and the work they are doing. For example, the analyst who loves big data sets whether it’s CPG or health care. The software engineer who know several of the team members already and wants to work with them again. The Head of Finance who sees each new industry as a new problem to learn and solve. None of these folks may share the ‘heart on the sleeve’ mission alignment of the founder(s). That’s fine!

So overall there’s problem some roles where mission-driven really matter. And perhaps, especially early at the company, if the *only* mission-driven person at the company is one of the founders, you’re setting yourself up for a tough culture building exercise, but I’d suggest to not over-filter and consider this trait just one of what you evaluate in a candidate.

When we back a founder we never assume they’re a fully formed version of themselves — whether it’s their first company or their fifth! Because of this, we’re always happy to sign up for working with them on identifying where their strengths have trade-offs or tendencies that can be balanced out. We might technically be buying some shares in an LLC but what we’re really doing is helping people come together to build effectively together.

Fired Up To Invest In East Fork, A Company With A Mission

Their Pottery Caught Our Eyes, Their Philosophy Grabbed Our Hearts & Their Growth Intrigued Our Brains

Coffee is very important to me. I mean, my Twitter screen name is “👨‍💻☕” so we’re talking identity-level important and by extension, any coffee-accessory must be up to snuff. I’m not a snob, just deliberate. And that intentionality has caused an exploration of drinking vessels. Size, durability, aesthetics and heft. Don’t give me a pinkies-up tea cup. I want a mug.

Several years ago that search brought me to East Fork, which at the time was having trouble keeping their Instagram-famous mug in stock. “Out of stock” is usually enough to cause me to surf onward but there was something especially compelling about this product. A mailing list sign-up was all it took and next time the mug became available, my inbox was populated and my curiosity fed. And it was worth it.

If Phase 1 was now completed, Phase 2 brought me deeper into the company’s story, courtesy of a podcast hosted by one of our portfolio companies. I heard Alex Matisse tell East Fork’s history, started clicking around on their Instagram feed and reading Connie Matisse’s blog posts. Oh, and I kept ordering mugs. We now have a dozen+ (they’ve since solved inventory issues).

Through their newsletter I saw milestones and setbacks. Fits and starts. Questions debated about how much they could, or should, embrace growth — remember this all sorta coincided with peak D2C hype. It was notable to me that they wanted to grow, but creatively, sustainably and in a manner which benefitted their entire team and local community, not just the founders. This resulted in pushing employee pay up, investigating the biases in their hiring process, being thoughtful about a limited number of brand collaborations, and using their scarcity/collectability to drive charity fundraisers. I’m a believer that where you spend your dollars and your time is the best illustration of what matters to you. Everything else is just words.

We probably would have just let the relationship at Phase 2 (happy customer largely unknown to the company outside of a CRM database row) if it wasn’t for my friend Margaret Stewart. Mags and I worked together previously, having very proudly stole her away from Marissa Mayer’s consumer group to run YouTube’s Design and User Experience team. Years later we maintained a relationship, albeit it most digital (although we got to celebrate their wedding anniversary with a hoedown and my wife went up in a hot air balloon with her recently — those are separate posts). So it wasn’t that I was surprised to hear from her a few months back, just more that she was sharing an unexpected opportunity: did Caroline and I want to invest in East Fork? Margaret had just joined their Board of Advisors and invested herself. And this started Phase 3.

As I dove into chatting with Alex M, reviewing their plans for the next few years and understanding what (if anything) they hoped to get from me besides capital, it seemed, like their mug in my hand, a great fit. I mean, how can I not love a company with a Twitter bio of “We make pottery in the Blue Ridge Mountains and are highly opinionated.” And so earlier this year we added “shareholders” alongside “customers” and “fans.”

It’s always a privilege to have the ability to back people, projects and companies which we care about. We invested because we believe in their product, support their mission and are equally convinced it’s a great business. If you’re not yet familiar with their pottery, dinnerware and more, I invite you to check out East Fork’s website, and begin your own Phase 1. Who knows where it might head….

VCs ‘Anti-Portfolio’ Lists Are Mostly Performative BS

Why Investors Touting Their Mistakes Is Still Just Content Marketing

“Ha you proved me wrong. I was too bone-headed to see it. Should have invested. Congrats!” That’s the tweet sent by the venture capitalist after a big IPO by a startup they decided not to back years earlier. Maybe there’ll even be a screencap of their pass email, or similar ‘proof’ that they were in conversation with the founders during their fundraises. Then you talk to said founders and they’re like, yeah, we never really engaged with that firm and probably wouldn’t have taken their money anyway given the options we had. The tweet is VC version of You can’t break up with me because I’m breaking up with you!

The venture investment process can be over-simplified to See, Pick, Win.

See the highest quality opportunities, the most interesting founders, the hottest financings

Pick the ones that you believe are the best of the best by whatever process you employ

Win the opportunity to give those founders your money in hopes of getting lots back at a later date

When a startup succeeds the investor winners generally take their victory lap (me and Satya included — we’re not holier than thou!). But what if you weren’t winner? Well, next best thing is to signal that you did *see* the deal, even if you didn’t *pick* it. It’s a subtle way to reassert control and narrative, vs just staying quiet, or congratulating the founders privately. Tell me the last time an investor publicly shared a loss or miss? Oh wait, I did. (Maybe I *am* holier than thou😈) No one wants to be outside of the loop, to have not even seen [fill in the blank] startup is worse than having passed on them.

For those who’ve been around a while, it’s fair to read this post and assume I’m slagging on Bessemer Venture Partners, as far as I can tell the originator of the public anti-portfolio concept. But I’m not! Like many things, the original intention was pure and introspective. A way to share some degree of humility in a business that may not typically reward this trait. Bessemer, keep doing your thing!

But everyone who isn’t BVP should find a different way to retroactively ‘think in public’ that adds some value to the community at large.

Want to talk about an investment pass you regret? Talk about what blindspots your firm had in their ‘pattern recognition’ and how the partnership worked to correct.

Realize you had an unanswered seed fundraise cold email from a now decacorn sitting in your email archives? Question more generally whether requiring a warm introduction is the alpha-collecting strategy or a relic of past GPs.

The way we get better as investors — and help founders succeed — is by challenging our own histories, not just faux-celebrating them.

Peloton’s New CEO Is Incredibly Candid, & the ‘Micromort’ Estimates Risk of Dying From Any Activity

Two Great Reads on Leadership, and Rational Risk Taking

Two great reads I wanted to share with you — one is about leadership, the other is about risk.

Peloton’s New C.E.O. on the Tough Road Ahead

Interview with Barry McCarthy by NYTimes DealBook

This was one of the most candid interviews by an incoming CEO in a turnaround situation that I’ve ever seen!

Lots of analysts have said that everyone who wants a Peloton already bought one. How big is the TAM, or the total addressable market?

You can’t possibly know what the TAM is. You’re in the middle of inventing the TAM.

On founders and vision, and the challenges of reality

What have you learned from the other founders you’ve worked with?

They see things the rest of us don’t see, which is why they get to be founders.

What went wrong here?

They got caught up in the vision thing at the expense of getting real and dealing with the world as it is. I mean, really, who thought that Covid was going to be the forever thing?

On his relationship with John Foley [Peloton cofounder, Board member and original CEO

How hard will it be leading the company when John and other insiders still have a controlling stake and veto right? You still work for him.

The question is: What best serves his economic interest? At the end of the day, he’s very much an economic animal. And so, if we’re winning in the marketplace with my leadership, I think this is a nonissue. He’s a happy camper. He’s doing what he likes doing. Which is not everything else that I’m doing — and he gets to be the product visionary, right?

And if the company isn’t doing well, I’m getting replaced anyway. So it’s pretty cut and dry. And if I don’t do well — and there’s a change — maybe at that point the business gets sold.

We Need A Standard Unit Of Measure For Risk

Steven Johnson on the ‘micromort,’ an attempt to standardize the expression of fatality risk for a given cause of death.

Sometimes I feel as if we’re increasingly uncomfortable with the idea that there’s always going to be some risk in our lives, and especially some degree of unknown risks in the earliest waves of innovation. I understand that part of this ‘risk backlash’ is that in many historical cases the risks have been disproportionately born by those with the least power in America.

Johnson’s post introduced me to a concept created by a Stanford engineering professor in the 1980s: the micromort. A micromort represents a one-in-a-million chance of death. And here’s an example of how it’s applied in context [via Wikipedia]:

The rational quant side of me does love turning perceived risk into clear comparisons of mortality. It’s a blunt instrument and I’m sure not without its own skeptics, but was a read I recommend.

How To Raise Venture Funding When Investors Hate Your Market

There’s a Specific Strategy For Getting Capital When Sentiment Turns Sour

“There’s only one thing that entrepreneurs have complete control over, and that’s picking the market they want to operate in.” I’m paraphrasing wisdom shared by entrepreneur/investor Jeff Kearl at a conference. Jeff was pointing out there are a host of attributes tied to the market you’re deciding to operate in and you should be thoughtful about that selection. “Attractiveness to VCs” might be one consideration that you consider, but what happens if after you get started building, the market turns and all of a sudden, you’re in a category that investors view skeptically? Founder pain! But don’t worry, there are some tactics you can deploy to try and navigate through.

Before we launch into that playbook though, let me give some examples of how this ‘category chill’ plays out. You can think of it most broadly as an area of innovation which is trendy, new or thought to have high potential. However some high profile failures and/or sub-VC scale outcomes start investors questioning whether it’s worth continuing to fund the problem space right now or is there some fundamental limit on value creation. For example, consumer hardware startups post-Juicero or 3D printing a decade ago. More recently podcasting ventures seem to have only reached exit values which have been solid for founders and angel investors, but well below “fund returning” for multibillion AUM firms.

When faced with this ‘new information’ you, as an early stage founder working in the industry, have a choice to make: have you learned something about this market which suggests you need to pivot away from where you were focused (or ween yourself off venture capital to other forms of funding); or, are you more convicted than ever, having learned from the other startups and using their outcomes to inform your path forward? If it’s the former, well, this post would end right here, so let’s assume it’s the latter: you’re still a believer. Raising capital just got much harder, but here’s how to play it in your fundraising conversations:

A. Don’t Ignore The Elephant In The Room

Leaving the issue undiscussed with potential investors doesn’t mean “whew, we got out of there without hard questions” but instead you missed an opportunity to counter the narrative. Either they’re now thinking you’re naive about your market, or it comes up in their diligence/conversations with their colleagues who express skepticism. You gotta address it — the recent failures or perceived ceiling on exits. Take it head on at the 50,000 foot level and drop one or two insight gems regarding why your company is better positioned. Maybe you’ve spoken with the previous companies customers or investors or employees and learned from that — maybe you’re even now taking their customers, hiring their best team members, whatever.

B. Stop Pitching FOMO Investors, They Won’t Convert

Don’t hug trees because they don’t hug back. Just a weird sales saying I recall someone telling me years ago. Basic meaning is that you more often find success convincing folks who are likely buyers than objection handling for those who are never going to convert.

When your sector goes cold the FOMO momentum investors are never going to get there and I think it’s a waste of time to try and persuade them. What are some signals for these types of investors? A lot of asking who else is involved in the round or inability to tell you what their investment thesis would be for a company like yours — ie they don’t know what specifically they’re trying to figure out.

Instead spend your time on these types of investors:

  • Senior Folks at Their Firms: These individuals will have the conviction to make their own decisions and will be less impacted by the groupthink of their partnership or industry. Note, the junior investment professionals working for the senior Partner can be good conduits — don’t ignore them — just a newer, junior General Partner is less likely to make a contrarian first investment at many firms (exceptions exist of course).
  • Industry Execs, Former Industry Founders as Angels: Many will want to see *someone* crack the problem they were trying to solve, even if it wasn’t (or only partially) was them. Sometimes they’ll be competitively conflicted if they’re still working in the space, but no harm asking.
  • Relevant Corporate Strategics: Often these folks are investing with dual purposes. Yes they need an economic return but they’re also trying to strengthen their ecosystem, whether it’s startups who can be customers, compete against their competition directly or indirectly, and so on.

C. Just Survive

Stop worrying about venture fundraising and just get into survival mode. Bring your burn rate down, crowdfund from your community of users, do whatever you can to make it to the other side of the disillusionment trough. Because if you do, you’ll likely be alone and advantaged when the wind starts blowing at your back instead of in your face.

Good luck!