Monthly Archives: December 2017

Making versus reading the headlines

When I read the headlines in the tech news, sometimes I feel like I’m not doing enough. There are so many people working on world-changing projects that reading about the amazing things they’re attempting to do and doing is humbling.

Upon deeper reflection, the feeling of humility relative to the goals and outcomes achieved by others in the tech community cedes its place to a feeling of gratitude for all that they’re doing. When producers produce, it’s primarily consumers who benefit, so I’m grateful to all the producers.

Finally, the feeling of gratitude cedes it way to questioning why I am not contributing more.

A great way to test whether you’re doing enough and thinking big enough is to ask yourself whether, if done well, the projects you’re working on will also be featured in the headlines.

Rather than read the headlines, your life gives you the opportunity to make them.

The human you’re doing business with

Before investing in a startup, investors evaluate and develop a view on the startup’s team and market. Similarly, entrepreneurs do the same on the investor and the terms being offered.

However, it’s useful to complement this methodical business analysis with an understanding of the person that you’re partnering with, beyond their role as entrepreneur or investor. In other words, it’s useful to understand the human you’re about to partner with.

What are their values? What do they enjoy doing when not working? Do they have a family and kids and if so what do their family members do? Where and how were they brought up? When they are hopefully old and look back on their life, what do they want to have achieved?

Exploring questions like these over an informal breakfast, lunch, or dinner serves two purposes.

First, it lets you understand if your personal backgrounds, values, and goals are likely to make you good partners.

Second, in the event that you decide to partner and something goes wrong in the future, which to different degrees it always does, it helps you recognize the human behind the business problem. This makes it more likely for you to, together, show the intent necessary to overcome the problem.

After a career in venture capital

It’s been 10 years since I started investing in technology startups. When I first started as a 21 year old, I was very young. While youth is an asset in being a user of and understanding the latest technologies, it’s a liability in terms of understanding how businesses and the people that work within them operate.

Now that I’m 31, although I’m still younger than most startup investors, I’m at a better balance between understanding both the technology side and the business side of the equation. I imagine that, around the age of 35 to 40, your understanding of both sides reaches a similar level.

After that, while you continue to grow wiser in terms of understanding people and businesses, your understanding of current technologies begins to decline. Taking most venture capitalists as a proxy, my intuition suggests that it’s difficult to be a great startup investor after the age of around 60.

I used to think that I would invest in startups for the rest of my life. I’m now coming to realize that, if I live long enough, this is unlikely to be the case. That’s the downside.

The upside is that I’ll get to try something new after the age of 60, give or take a few years. In line with the skills that I’ll have at that age, it will likely require a more limited understanding of the latest technologies, and a greater understanding of people and businesses.

I wonder what it will be.

Thinking about the problem versus the solutions

In a post from earlier this year, I wrote about how providing the right answers is only important assuming we’ve first asked the right questions. In fact, once we ask the right questions, the answers are relatively easy to find.

Albert Einstein conveys a similar view in this quote“If I had an hour to solve a problem I’d spend 55 minutes thinking about the problem and 5 minutes thinking about solutions.”

In other words, thinking about the problem at length helps you ask the right questions. Once you’ve done so, the answers tend to fall into place with relative ease.

AI: What’s working, what’s not

Frank Chen from Andreessen Horowitz recently published a presentation sharing the most recent progress in the field of artificial intelligence.

The presentation is a follow up to Frank’s primer, published last year, on artificial intelligence and deep learning. The presentation’s primary hypothesis is that AI will augment all software. It follows up on this hypothesis by featuring current examples of how tech companies are using AI, and addresses some of the concerns around AI including the threats of general AI which could fast be followed by super AI, as well as the potential for job losses due to AI.

You can watch the full presentation below.

The attractiveness of different investment stages

When I first started investing, I thought that the best investment opportunities were at the seed stage. In other words, I thought that the best opportunities were in being the first investor in companies. My reasoning was that, if you know what you’re doing, this is the stage when there is the greatest return potential.

However, in addition to the greater return potential, seed stage investments also feature the greatest risk, and the greatest competition. If you know what you’re doing, you can minimize the risk. However, you can’t change the competition.

The number of people who can lead a $500K seed round, or contribute $50K towards it, are numerous. And this number will only grow as technology in general, and software in particular, changes the way that things are done in more and more sectors. The result is that seed valuations are often pushed higher than what can be justified by seed companies’ underlying business prospects.

As the round size and the resulting check size increase, in other words in Series A and B rounds, the number of people who are competing for a deal declines. And my intuition suggests that the reward to risk ratio does not decline as much. In other words, series A and B investors occupy a more attractive part of the value chain than seed investors.

I’ve participated in a few later stage rounds, beyond the series B. However, I haven’t done so a sufficient number of times to have a feel for whether later stage rounds are even more attractive than series A and B investments. With time, perhaps I’ll find out.

What’s missing from this reasoning is your personal fit for different stages. For example, earlier stage investment decisions are more qualitative in nature whereas later stage decisions are more quantitative in nature. As a result, even if series A and B investments represent a more attractive part of the value chain, they might not be the right fit for a highly qualitative investor.


Every action you take, no matter how positive the intent, can be taken out of context, spun, and presented in a negative light. All you need for this to happen is people who don’t like you.

Similarly, every action you take, no matter how negative the intent, can be presented in a positive light if the people doing so like you, or fear you.

I’m not advocating for the latter.

For the former, enough people will take this approach based on what you do that you shouldn’t give them another reason to do so by not being kind.

When to raise money from a strategic investor

As a startup, there are two benefits of raising money from a strategic investor.

First, the strategic support provided by the investor can provide value beyond what a financial investor can provide. For example, this may come in the form of new customers, new suppliers, a distribution channel, technology, or a reduced cost base.

Second, a strategic investor can turn into a strategic buyer at the time of exit.

There are also two downsides to raising money from a strategic investor.

The first is that the strategic investor can, either through their investment rights or through persuasion, pull your startup in a direction that makes sense for the interests of the strategic but not necessarily for your startup. This goes beyond the different perspectives that founders and all investors, including financial investors, can have about the best direction for the company to achieve its goal of maximizing long-term shareholder value.

The second is that the presence of the strategic investor and the fact that it is often a likely buyer of the company has the potential to limit other exit options for the company. As a result of the restricted exit options, financial investors are often less willing to invest in the company.

When you’re an early stage company, you have yet to exhaust the many ways in which you can create value. You’re also far removed from an exit. As a result, the costs of raising money from a strategic investor outweigh the benefits. If you have other options, you should avoid raising money from a strategic investor.

When you’re a late stage company, a strategic investor can provide new value in an environment where you’ve exhausted many of the easy ways to create value. You also start to think about an eventual exit. The benefits of raising money from a strategic investor might begin to outweigh the costs, so you will want to think about doing so.

Hard at first, easy later

Doing something consumes energy. As a result, you have less energy to do the thing again in the short term, which makes it harder to do.

However, doing something also builds that thing into a habit. This means that it takes less energy to do the thing in the long term, which makes it easier to do.

So you need to do things that are hard at first in order for them to become easy later.