Why 75% of Active Investors Will Disappear in the Next Few Years

Yeah. Thanks for having me.

circuitous. I didn’t know anything about venture startups growing up. I was obsessed with film. And so when I got to school, my original major was actually filmmaking. My magnum opus that I created, you can still find on YouTube, was Pokemon Love Song. So I was very into film and videos, I was paying for college doing wedding videos and commercials and things like that. So that focus on film was a big part of my life. And then eventually got to the point where I had too many clients.

And so I just started farming them out to other creatives. I’d take 2% on whatever they would make. And before I knew it, I realized I was much better at getting jobs than I was at making videos. And so I kind of transitioned to that as a full time job. And I joked that I was running a creator marketplace long before it was cool. But I built this really crappy website. I expanded to graphic designers and photographers, and I was helping them get jobs and do all these different things.

So that was my first disclosure. I didn’t even know to call that a startup. You can ask my wife. For the entire time I ran it, basically, I called it a project. I was just working on a project because I was so used to a job being a very different thing. Eventually, I ended up selling that business and I was trying to figure out what to do next. I was talking to a friend and they said, Well, what did you like most about running your company?

And I said, I love being this resource for these passionate people who are building their own businesses. I love that they could rely on me and I could go help knock down walls for them or finances for them or whatever. My friend said, Well, that’s what venture capitalists do. I said, Well, I don’t know what those words mean when placed together. I stumbled backwards into the world of venture. I’d been running my company in Utah, worked for a seed fund called Kickstart in Utah, that was my education in venture.

But that’s what led me out to the Bay Area. Eventually, I wanted to see more than just seed investing. Wanted to see lots of different companies. So jumped to the Bay Area and worked at firms like TCV and Coatue and Index. And eventually, Contrary is where I decided to hang up my hat and be able to put my fingerprints on something and actually help build something.

TCV, then Coatue, then Index. It’s a real smattering of opportunities. TCV, I was very drinking from the fire hose. When I was there, it was very much like a private equity style of investing. It was really looking for diamonds in the rough. The people at TCV were never afraid to get their hands dirty. For me, that really changed my perspective of what it means to be an investor. I never really liked the memeification of venture because my whole career, I’ve had this, we do the work attitude that I learned at TCV.

I don’t ever feel like I would passively say, Hey, let me know how I can be helpful. I just started doing stuff. Then I go to the founder and I say, Hey, I did this and that. Is that your top priority? If not, redirect me. What else can I do? That was definitely a big part of TCV.

Well, let’s do Coatue because that was the order. I feel like I actually like my journey in order. If I could have written the book, this is how I would have written it. Hit me, Coatue. What was the lesson from Coatue? Again, it’s very hedge fund style of investing. Right? If TCV was the private equity, Coatue was the hedge fund. Hedge funds are very intense. They’re very competitive inside and out. But one of the most eye opening things that I learned was not just, Hey, we get in and we do work, but we do work in markets that matter and after opportunities that matter.

At Coatue, I learned this idea from Thomas Laffont. He called it tam arbitrage. It’s this idea that if you can do the work and understand the market better than anyone else and appreciate that it’s actually bigger than anybody else gives it credit for, that can help you pay higher prices. Sometimes that can come back to bite you. But if markets really do turn out to be larger than anybody else gave them credit for, not only can you pay higher prices, you can get more aggressive with burn, you can grow more quickly, you can experiment a lot more because you have a more fundamental understanding of the market.

And it’s kind of the Buffett ism, right? If a good manager meets a bad business, it’s the reputation of the business that remains intact. I think the same way about a market. If a really good founder goes and tackles a really crappy market, that market’s still gonna be crappy. The question marks are gonna be around that founder’s ability to tackle a market if it’s not big enough.

The way that I think about Index, it’s a little bit different. For me, I felt like Index was like graduate school in venture capital. Venture, if I had to sum it up, venture is meant to be studied. And while I was at Index, there were good and bad things. I have started to appreciate how much you have to actually treat your effort as something to be studied and learned from postmortems, there is an actual psychology and study that every firm should apply to the what they do, good and bad.

Everybody knows what they’re doing. The reason people say stuff like that is that, oh, nobody knows what they’re doing. We’re all just kinda making stuff up as we go. Everyone’s trying to soften the blow of being wrong, but there are people who are exceptional at what they do, and there are people that are repeatedly really bad at what they do. I think the biggest difference between those people is that the people who get really good are the people who learn and grow and pay attention to how they do stuff, and then they get better at it.

So those people do know what they’re doing, not only what they’re doing, what they’re trying to accomplish, but they know they’re capable of their craft and their skill because they’ve studied it. I feel like that makes the biggest difference.

So Josh Wolfe made this prediction back in February. He said that in his prediction, 5075% of active investors in the private markets are just gonna disappear within the next few years. What is a so so venture firm? What is differentiation really? People are starting to care more and more about the holistic character of these institutions that they work with. People care a lot more about what the identity of this firm is. I think founders are progressively gonna look for more distinct characteristics in the firms that they work with.

And I define that as differentiation. It’s how capable is somebody externally able to articulate you as a firm. And if you can’t answer that question very clearly, it’s gonna get harder and harder and harder. And so I think the ways that firms look to differentiate themselves is gonna get progressively more interesting.

I would agree with that. And this was one of my first articles that really blew up was the unbundling of venture capital. And the evolution was sort of these three phases of how firms have been structured. There are subtle changes that are happening. You have these monolithic brands, the old school 60s, 70s, 80s, whatever. You’ve got the Kleiner Perkins and the Sequoias and stuff like that, and you almost abstract away the partners that’s focused on this almost like a bank, this monolithic institution. The next phase of that progression was what I call these fiefdoms.

Andreesen’s crypto arm, right, or Sequoia China or whatever. You have these sort of pockets that exist, but by and large, they have a Chris Dixon who is the leader of that fiefdom. Progressively, that has continued to abstract even further to the point where now what I refer to in my writing is the renegades of venture. But my definition of what it means to be a renegade in venture does not have to mean that it’s this, like, radically different model or it’s venture debt two point o or whatever.

It doesn’t have to be crazy. It is a Logan Bartley. Right? It is somebody who is changing the way that they define themselves. You are a perfect example of that and what you’ve built with your firm. I mean, you have a vibe. It’s more about these vibes that people feel.

Yeah. I joke. It’s kind of the line where they say, we know that half of our marketing budget is wasted. We just don’t know which half. Probably 80% plus of venture funds are not great. We just don’t always know which ones they are. In my mind, the characteristics that I look at when I think about, like, what does it mean to be so so? The three buckets that kinda come to mind for me, I mean, one is it’s pretty straightforward. It’s economic performance. And Doug Leone said this to you last September.

It’s a quote that I use a lot where he talks about the two most important things are number one, performance and number two, teamwork. But if we don’t have number one, nothing else matters. It doesn’t matter what three or four or whatever is. Performance is critical. And there are firms out there, and it definitely it takes a long time for these things to sort of catch up with you. But there are firms out there that even in this massive bull market that we’ve had, they have not returned enough capital to be able to justify the carry that they’ve paid out to partners.

Like, there are economic models that are gonna crumble under the pressure of the market that we’re going into now. The other piece of it is cultural. Culture can kill firms. There’s definitely examples of that. I think that there are even many well regarded firms that outside in people would think are great, but internally, they’re eating each other. And eventually, that spills out into the work. It impacts their performance. And then the third just being branded, which is what we’re talking about. This is also a Logan Bartlett joke.

Right? As we talk about how as VCs, invest in these firms that have durable competitive moats when venture firms have it’s largely brand. Right? It’s largely that competitive advantage that comes from a brand. But I feel like in my mind, it’s this idea that market correction in particular, it didn’t take very long for a lot of bad behavior to start coming out. The bull market has hidden a multitude of sins of venture firms haven’t had to be super aggressive in certain ways. Within a few months, you started seeing things like firms jeopardizing a company’s survival, holding up funding rounds, demanding specific provisions be met, whatever.

That behavior is gonna get out too. Like, we’re talking about the positive side of building a brand, but the negative side of brand and bad behavior, that can kill you too.

I don’t disagree with that. I wrote this article a few months ago called the death of a venture fund. I went and interviewed a bunch of people. It is actually inspired by Roloff, and he was talking about this exercise they do at Sequoia where they say, all right, the group of us in this room, imagine that we presided over the decline of Sequoia. What happened? What did we do wrong? That sort of pre mortem evaluating what could cause the death of a firm like Sequoia. I dug into that, and I think venture has a lot of main character energy, number one.

Number two, we’re getting to Internet time. So maybe it took multiple decades for a firm to die in the sixties and seventies and whatever eighties. I think that that pace is going to increase. Information gets disseminated more quickly. Companies scale more quickly for better or for worse. Venture firms have an impact on them. All of those things are going to happen faster and faster. The thing that we have to do is to skate where the puck is gonna be or whatever. Right? But I think the rate of death can increase.

It’s not gonna be

I think it’s an a question of, like, LP perspective. LPs are fundamentally very stable and secure and Sally principle. Right? Same as last year. What have we done?

I think that is the reason for me why I am more interested in trying to build something. I think that the difficulty is unseating anybody who is really powerful.

I think that the sources of wealth will change. It’s actually the family office circuit is a fascinating world. The ways that people make their money and the people who are brought in to help manage that money. For whatever reason, I’ve kind of stumbled into this family office institutional allocation world on Twitter, and you pay attention to what those folks are saying. And progressively, more and more family offices, the way they allocate their capital, they wanna do things differently. I think we’re still at, like, the very earliest inflection point, but I feel like some of those things are gonna start to change in terms of the way that people want to manage that capital.

I do see the, like, we wanna try direct investing angle. I think there’s enough folks that get burned that it’s not something that is, like, becomes a consistent part of their strategy. I think it’s, an ebb and flow thing. And I think that you’re seeing a lot of these pretty well established institutional people start to take over some of these shops. And I think that there’s gonna be a upset. Again, the question is where is that gonna shake out? What is it gonna look like? My hope is that there is something changing.

It feels like there’s enough indications that something is changing.

So number one, there is diversification. Right? I do actually think that there is an opportunity to invest in lots of different things. I really like the episode you did with Will. You talk about the sort of venture firms that aren’t really venture firms. And so I think that number one, there is a more disciplined approach to diversification. Number two, when you think about allocating capital to venture, some of the things that you talked about, right, which is looking for allocators that have these characteristics of being able to identify their unique funnel.

But I think the biggest thing for me would be focusing on where the biggest pockets of high quality people are congregating. Still always the halo effect where any founder, regardless of their previous affiliations, are gonna go where those halo effects exist. For me, it is all about allocating to who has access to these pockets of people, these communities of people, and how are they building really deep long term relationships with those folks. I feel like a lot of firms right now benefit from here and there deep relationships that continue to compound.

But it’s not just about how do you take a top of funnel of all companies, but how do you build a product that stays close to those people throughout their lives? Because I think there’s a really exciting opportunity to be able to identify multiple points along an individual’s life cycle to be able to engage with and allocate capital different ways beyond just, hey, how do we have the best top of funnel?

The idea was sort of born out of this article by David Perel called Naked Brands, and he goes through all these examples of ways that different sort of industries are changing. So he talks about, like, fashion and sports and media and and how people are progressively transitioning to trust more in people that they can empathize with versus just, like, brands that they can trust. So it’s progressively less about Coca Cola and more about LeBron James or whatever. This essence of vibes that people give off. But the idea, I think, is that every individual investor, every firm, they’re trying to articulate what job are you hiring me for.

Right? The sort of jobs to be done framework from Clayton Christensen. I think that those deeper personal relationships are going to come from the way that people present themselves online and then being able to attract the right people that wanna have a relationship with you.

I’m not gonna toot your horn. You’re doing pretty good. The move into TikTok was spades. That was pretty good. There’s also this element of community. I think that there are people who do community really well. I look at Y Combinator, and there’s no question that they’ve built a generational community. Folks like Gary and stuff stepping into that role, like, think that they’re gonna continue to just be amazing. The opportunity that exists right now is to create, like, an ongoing relevance in the relationship that you have with somebody.

It’s not a one and done kind of thing. Right? Even YC, most people talk about it like, yeah, was in the summer twenty twenty cohort or whatever. But to stay relevant, like, that’s a relationship. To be part of a program, it’s sort of you’re in it and then you’re out of it and, oh, what fun memories we have. To stay relevant throughout someone’s life, that’s having a relationship with them because you continue to be relevant to them. Candidly, I don’t know that anybody is doing that well.

I think that the center of gravity has shifted to your point largely to the individual investors. I think there’s very few firms that have kept up with that shifting the center of gravity. Firms that are trying to push forward the almost celebrity, if you will, of the individuals, that’s powerful dynamic. I think it’s one of the reasons why anybody with a reasonably sized Twitter following probably gets at least job interest, if not a job offer, from Anduril. Right? Like, they recognize that sort of micro celebrity appeal of being able to hire anybody who has even remotely a sizable following.

So I think that they are trying to tack on to that shift. I don’t think anybody has done it well because it feels uncomfortable. Like, it feels uncomfortable to have this, like, quote, unquote, brand. When today, most of the way that people wanna interact with institutions is they wanna interact with people knowing that the institution has something that has backing. Right? But it’s like that person represents the vehicle in that stuff. You don’t wanna necessarily be interacting with this faceless monolithic brand, but most firms’ marketing efforts have not kept up with that shift in gravity.

The short answer is we’ve seen them try. We haven’t seen very many succeed. Some examples of this, Anduril has some of these where they have Slack channels where they’ll take the CROs of all their companies and dump them into Slack channel. It’s not a good community. It’s an attempt to trying to coalesce people into buckets, but it’s not a good attempt. And so your question around, like, what does it mean to make a successful community? In my perspective and, obviously, I’m biased. Contrary is this is just our bread and butter.

I mean, before we had a fund, we had a community of about a 100 future founders that we had met and we’re working with. And so we’ve always tried to emphasize this people centric community. The reality of why it works is just like any product. If the customer is an afterthought, it’s not going to hit. Like it’s not going to be a very good product if it’s secondary to something else. Even from a community perspective, you talk about people’s scout programs and stuff. Those scout programs can be powerful.

I think that you’re gonna see a lot of dilution in the value and quality of those scout networks progressively over time. I think the biggest reason for that is because it is an afterthought. We plant this community with the hope that it leads to something else, which is deal flow or whatever. You’re not necessarily super incentivized to make that community experience as high quality as possible. You’re incentivized to get it to lead to something else. And in contrary, we talk about this a lot where we are as focused on our community members as we are our portfolio founders because we hope that eventually, one day, they become both.

Right? The focus is on people who will eventually be founders. We’re gonna help them at every phase of their career so that when they become a portfolio founder, it’s not that we suddenly shifted and we’re like, oh, great. Now we can stop exuding all this effort on them as community members and now really focus on them as portfolio founders. Don’t think anybody has done that well because community has always been an afterthought, not the core product.

I think there’s nothing like it. I think the biggest thing is that it’s a compounding effect. No firm compounds the way that y c does because it’s so expansive and so involved in all these different aspects and can bring people into the in these different ways that I think, like, that compounding effect on y c is not going anywhere.

So I read the biography of Steven Schwartzman, the founder of Blackstone, a couple years ago. And there is this quote that really struck me where he talks about how they build businesses. And the idea was basically, like, if we come across the right person to scale a business in a great investment class, why not? We can apply our strengths, our network, our resources. They’re so focused not on being like a very we’re not a just a private equity firm. We’re not this. We’re not that. We are everything.

And now they’re effectively a holding company for financial asset class. Right? 800,000,000,000 of AUM. They’ve got private equity, real estate, hedge funds, credit funds, whatever. They think of it almost like exposure. I don’t remember who, but somebody said this idea that, like, 80% or something of building a business is kind of the same thing across the board. It’s that 20% that’s super unique to the company and the market and the circumstances that is kind of the secret sauce. And if that is true, I feel like Blackstone has done a really good job of figuring out what the 80% is, is they’ve just built this infrastructure that kinda AWS of raising capital and deploying capital towards x y z strategy.

They figured that crap out, and then they just focus on, hey. How do we go find that person who represents the secret sauce, that 20%? And we plug them into the infrastructure, we let them go nuts, and we just scale to this big thing. And I think that the firm that closely most closely resembles that in venture is Anduril. The way that they have approached things like gaming and crypto and biotech and so like that. But that’s sort of them saying, hey. We have this fundamental infrastructure of brand, of thought leadership, of capital raising, whatever, portfolio support, whatever, if that’s valuable.

They have that infrastructure. And if they can take to your point, if they can take 1.52 x return thresholds, people can park their money there, and they can go take big bets, giving Adam Neumann money for round two. It’s just sort of this massive calculus of we have this infrastructure. How do we bring in capital and deploy it at scale? Tiger, to some extent, tried to do that, though they may not have nailed the 20% specialty. Is this good for our ecosystem? One of the reasons I characterize it is something that concerns me because I think that capital allocation and portfolio construction, like, those are macro activities.

I have heard large multistage firms talk about things like, hey. You know, we’ve got 15% of the portfolio allocated to fintech. I’d like to get some more allocation in that. It’s almost hedge fund esque in the way they think about where are they allocating their portfolio and stuff. That’s a very macro game. Company building is micro, especially in the earliest stages. It’s people, it’s lives, it’s families, it’s customers, it’s jobs, and it’s appropriate to have a certain level of abstraction when you’re thinking about like, hey.

Like, at the end of the day, this is a capitalist exercise. We’re trying to take in capital and maximize the outcome of capital. Like, that’s okay. It’s okay to have that abstraction. At some point, if that abstraction gets so far removed from this sort of fundamental company building aspect, I think that you start to get into some dangerous territory because, I mean, when those companies fail, when they get tons of capital and all this thing, it’s an exercise in portfolio construction and capital allocation and all this stuff.

When those companies fail, it’s a blip on the macro. That’s okay because it’s 35,000,000,000 of AUM or 800,000,000,000 of AUM or whatever. But on the micro, it’s everything for a lot of those folks. And I think that abstraction causes some breaking points.

I agree with that. I think that one of the reasons for that is that for a long time, was kind of this arbitrage in venture where especially, I mean, the Internet is sort of the thing that this was the massive multiplier on all of these outcomes. And so nobody appreciated venture as a place where large amounts of capital could be effectively allocated to maximize returns. I think there was an arbitrage that existed where people could they had shockingly big outcomes. And over time, people have realized how big those outcomes can be and have paid more and more attention to it, which has attracted more and more capital.

One of the reasons I get concerned about and I understand the fundamental math that people are doing to say, hey. If I can allocate x amount of capital, if I can expect a certain rate of return, this is a place where I can park money, and that’s okay. The reason I am worried about the sort of excess capital is because there aren’t really, like, guardrails or good standards of excellence before. It’s, again, this idea that enough money can hide a multitude of sins. Like, we’ve seen it over and over again of bad products, bad go to market, bad unit economics.

Like, they can all be covered up just by having enough cash. And to your point, it’s not that there’s a lot of cash and it’s being allocated to good managers who are gonna do their best to invest that in really good companies. It’s to whoever will take it to try and get exposure to this market. I worry about that for sure because it also it muddies the water for everybody else, right, when everybody has so much cash. We’re seeing this pullback now with this market correction.

It sort of tapered some of that, but I don’t think that that’s going away. I think that people are just gonna say, oh, never mind. Venture is actually not that great of an asset class. Back to bonds and real estate. I think that people recognize that there are still large outcomes to be had here, and so there’s still gonna be that excess of capital. And what we do with that and how companies react in that world, it’s something that every company has to worry about.

The first one that comes to mind, what I would describe as suspension of your own criticism. I think we went through such a phase of people just pumping everything they possibly could, rampant intellectual dishonesty, all these different things. I thought that it would be more humbling for more people. I think that there’s been this sort of, like, suspension of criticism. People are desperately trying to avoid having to come to grips with what they did over the last couple of years. That worries me a lot because I think that this is a great opportunity to sit back and reflect on what should we have done differently, what could you have done differently, whatever.

So I I think I expected a little bit more of the mea culpa, and there’s not been much of that at all. The second thing I think is that companies are more thoughtful about what matters most in the way that they build their business from a storytelling perspective. I think that before, it was just this idea that, hey. Like, if you have a pulse and you have some indication of an interesting market or whatever, there’s gonna be enough people that get jazzed.

I’ve had a lot more conversations with founders both in and outside of the portfolio where we’re talking about what should I focus on my business and how can I articulate that to investors to indicate the quality of my It’s not just about the big picture story, but it’s about where should I be focusing to be able to articulate my story of why my unit economics are working or why my market is sizable or why I do have product market fit or whatever? There’s more of that.

Or I feel like a lot of that was just swept under the rug because it was so focused on, like, how I tell just the biggest story I possibly can. That’s another thing that comes to mind recently that I’ve seen

I have seen chickens with their heads cut off running around trying figure out what the right price is. It’s it’s saying to me the conversations I’ve had, especially because most of my bread and butter is not necessarily the pre seed seed stuff. Contrary has done that by and large. I joined Contrary to help build out our ability to invest more in, like, Series A, Series B, Series C. And those companies that I’m working with, there is no rhyme or reason. There’s no valuation. There’s no thought process.

There’s no there’s certainly not a acceptance of down rounds for the most part beyond the very late stage folks that are just engineering capital raises at this point. But in the stages that I work at, there’s certainly not been an acceptance of down rounds. I’m shocked by the number of times I have a conversation with different founders, and I explain venture math, basically, like, very, very back of the envelope simple stuff where it’s like, listen. If your valuation is this and your revenue is this, and if I look at the next five to seven years and you have to go from where you are to hundreds plus millions of revenue, there’s gonna be a dilution along the way.

So my ownership is gonna be x. When And you get to that point, if you look at the public markets, they’re trading at these ranges. Then you’ll trade at those ranges. This will be our return, and that’s the fact. Like, if I can’t get that math to work, granted, there’s so many ifs in that statement, but just doing the math is the sense check that you do to say, does this make sense? And for people who are doing these deals at multiple billions of dollars for companies that are generating sub 20,000,000 of revenue or whatever, that math is really, really, really difficult to get to.

And the number of founders who are like, that’s just not a way that they think about things always surprises me because it’s different math. But that’s the math that people were sort of just, like, fudging and ignoring for the last couple of years, but it’s a reality that’s gonna punch a lot of people in the face.

I think at different points in time, invested too fast. Price sensitivity, I think, is the thing. I would say that my bigger mea culpa that I look at is appreciating the weight of gravity of what it means to build a massive company. The number of models that we build to be able to justify certain valuations. The number of them scaling to over $1,000,000,000 of revenue over the course of four or five years to say, well, if they scale to over 1,000,000,000 in revenue, then this is the return and it can be a very healthy return.

That’s our base case. It’s like that’s an insane base case. When I step back and think about how many companies in the literally hundreds of thousands of startups in the world, how many of them have scaled to over $1,000,000,000 of revenue? 200, 300, or something. Right? Like, it’s a tiny fraction of companies that have truly gotten to that massive scale. And so when you step back and think about that, I think that was the thing that, like, I used too easily to just say, well, if we can paint the most optimistic financial picture, anything makes sense.

And now I often find myself reflecting that and thinking, like, I wanna go compare this to, like, the companies that actually went up against gravity and did have to scale year after year after year after year achieving growth rates and adding new customers and launching new product lines and something like that. What did that look like? And much more often than I mean, it’s crazy the number of things that we’ve seen. Wiz talked about this and deal talked about this, and there’s a bunch of these companies talking about, hey.

One of the fastest companies to get to a 100,000,000 of ARR or whatever. And that’s great. There are companies that can be those massive scalers. But by and large, when you look at those companies that have sort of defied gravity, they almost never do it in these explosive nonlinear paths. They’re just compounders. Like, very quickly, they get to that sort of maybe 40% growth, and then they just crush it for a long time. You have the Snowflakes of the world. But even Snowflake, look at, right, they’re getting to 2,000,000,000 of revenue.

Insane, massive growth, eleven quarters of over a 100% growth. Eventually, it tapers off, and it’s just have you built an effective compounding engine or not? And I think that for me, that price insensitivity translated into not respecting or being reverential to how truly difficult it is to build one of those massive companies.

So I have on my personal website this thing I call my Quake books, the books that shook me. And so my most recent addition to that is this book. It’s called Reinventing Knowledge by Ian McNeely. It got me obsessed with this idea about the Republic Of Letters. Basically, just a study over history of the world has been changed largely through people writing personal letters, really smart people trading personal letters. And so now I’m obsessed with this republic of letters two point o where Twitter DMs are gonna change the world.

So my favorite person to work with lately is Amjad Masad, the CEO of Replit. I mean, I think the guy is an Oracle. Like, there’s just a shortage of ambition in the world, and every founder could benefit from having Amjad on their cap table because he just brings such an ambitious perspective.

I have been an obsessive notetaker in my life. There’s a scripture that I I joke in the quote. It’s whatsoever you record on earth shall be recorded in heaven. Like, I am a dogmatic notetaker, and I’d never found something that works the way my brain works. And I was watching this YouTube video with Tiago Forte, and he’s interviewing Connor. And I felt like I had stumbled on a prophet. I DMed him. I had to talk to him. Our first call, very unorthodox. It was he was shotgunning whiskey and Red Bull and lighting a cigarette with a blowtorch.

Definitely one of a kind founder call. I mean, I went on to do a 100 personal Rome tours because I just love the product so much, I’m still to this day an hourly active user.

me, what’s

did it change how you think? So back in the day, we passed on Coinbase 1,500,000,000. Still ebbs and you know, you look at the market cap, it’s definitely a big up and down. For me, the reason I think about that pass specifically and that missed opportunity, the failure was a failure to imagine a colossal shift in user behavior, how big those shifts can be when they happen. And there’s still a question to be had about what is gonna happen. You know, we went through this crazy bull market.

There was a lot of speculation. I think that it’s still around to stay. For me now, when I think about my, like, what do you have to believe equation, I try frequently to ask myself, what’s something that I strongly believe right now that I’m probably wrong about? And to try and constantly call into question those active because I had such a strong belief in the consumer shift not happening for Coinbase, and I think it has.

For me, personally, the biggest impact of an investment that I have made was a company called TeamShares, and it reminds me of a quote, I think it was with you, Keith Rabois, talking about, I measure success based on how many of my peers think I’m insane or laugh at me. So when I invested in TeamShares, was a couple of people that idea. The idea was to basically buy small businesses, turn them into ESOPs, and scale them almost like a holding company at scale with services. People thought of it as such a it was just like a private equity play or whatever.

But effectively, it was this fintech mechanism to be able to make employee ownership of not tech companies, but of salt of the earth types of businesses and increasing that equity ownership that exists. And there was so much skepticism about that, and that has I mean, financially, it’s been very rewarding of an investment. But also just seeing this, felt like to a lot of people a laughable idea, just execute incredibly well, that has reinforced my perspective as an investor to think about what are the things I actually believe in, not are just the things that I think people won’t laugh at me about.

twelve months only if you see that shift. Talked about with founders, there has still, I think, not been a reality check of what valuations really mean fundamentally. If that reality check continues to occur, like, think if progressively founders recognize what that means, I think that the growth market can improve. It’s gonna come down to earth. Valuations are gonna be a lot lower. It’s still gonna be hard to fundraise, but it’s not gonna be what it is right now. What it is right now is you have two sides of the party.

One, still convinced that they can get a billion dollar valuation. Before, was 3 to 5,000,000 of revenue could get you a billion dollar valuation or pre revenue. Now it’s like, but we’ve got 10,000,000. We’ve got 50,000,000. We want a billion. That mentality. And then you’ve got a bunch of investors that are, again, sort of chickens with their head cut off running around, having no idea how to price anything. Both of those things, I think, are going to improve over time. Investors are gonna get more thoughtful about valuations.

Founders are gonna be more thoughtful about what does valuation mean to them and what is success versus what they wish they could get.

That’s what I have seen. I think that there has yet to be a company like that. Because even when you look at some of the high profile failures that we’ve seen, I don’t know that any of them were, oh my gosh, they were just the darlings, the high flying. I mean, even when people talk about stuff like Theranos, there’s very few sort of traditional VCs involved in those. Like, that’s very rarely the darlings. I think the only way that that flight to safety, like, gets rocked is if there is something where you’re like, I thought this was a just a darling.

Like, everybody was convinced that this was a generational company, and it just absolutely imploded. I don’t think we’ve seen that, which reinforces for people that flight to safety.

I wish there was a better way to derisk those earliest days of starting a company. I think that there are a lot of ambitious people trapped in a systemic risk intolerance because of their circumstances or whatever. And I wish that we could lower the bar for that risk curve. It gets scary because as a capital allocator, I have to think about risk management, and I have to be thoughtful about different risks. I try as hard as I can to not let my biases that exist, they exist for everyone, stop me.

But I wish that we could derisk that sort of journey into being able to build something.

So I had the privilege of getting to lead an investment in Pave while I was at Index, and then to very quickly jump over to Contrary and be able to invest at Contrary as well. So Pave for context In the same round. The same round. Yeah. I love that. That’s brilliant. Worked it worked it perfectly. So I’m a huge fan of these businesses that can take massive critical corpuses of data and make them accessible and actionable, and then make it possible to build they’re gonna become a new foundational layer upon which to build new things.

So you think about, like, some of the investments I’ve made. Ramp does this with expenses and receipts. Packy called it the transaction layer of a business. Toast did this on the restaurant op side. Persona does this with user identity. So Pave does it with compensation data. So they’ve built this just massive database of compensation data for tech. Now that data, they can build on top of it in terms of compensation planning and offer letters and all these different areas to give people more visibility into what the job market looks like.

And over time, when you have that real time lens on the labor market and tech, the opportunities are pretty compelling. That’s really difficult data to sort of wrap your arms around.

There are sort of Trojan horses that give to get data model. So if you plug in any and you could do this with your firm. You any company can do this where if you plug in your HRIS to be able to offer up your salary data and your cap table management to offer up equity data, you get access to their benchmarking module. So you can see all these different cuts of different salaries and stuff like that. So that’s the data ingestion is this sort of gift to get completely free.

They’ve got over 600 different venture firms that are partners to be able to pull it, roll it out to their portfolio. It’s on that foundation that they then build things that they monetize on, like compensation planning and stuff like that.