1/33: So you want to be a top performing #VC investor. Here are six exercises you can practice as you evaluate #startups that will hone your skills, establish frameworks, and help identify great investments.

Read on if you’re interested:

2/33: Exercise 1: Describe the company’s magical experience

After reading a deck or hearing a pitch, can you easily articulate who their perfect customer is and how they’d interact with the company’s product/service in a perfect manner?

3/33: Only after you understand the experience that a company is trying to create can you evaluate it against currently available options. If the new experience is truly magical and differentiated then it might be worth your time.

4/33: If the experience is only slightly better than options that are readily available in the marketplace today, then the company better have a significant distribution or cost advantage that defines their “reason for existence”.

5/33: When a company is creating a magical experience for a broad audience AND they have distribution and/or cost advantage then you should lean in hard. The best of the best investments are designed to win on multiple dimensions.

Worried about the recent market drop?

Here are 24 top investing quotes from Buffett, Bogle, Graham, and more that can help🧵

"If you have trouble imagining a 20% loss in the stock market, you shouldn’t be in stocks."

-- John Bogle

"Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble."

-- Warren Buffett

“Individuals who cannot master their emotions are ill-suited to profit from the investment process”

-- Benjamin Graham

"A calm sea does not produce a skilled sailor."

-- Tom Culve

1/25: It’s been 6-months since I posted a thread about the trend of early stage companies raising of 2-3 back-to-back rounds with minimal progress in-between. I asked some amazing VCs whether or not anything has changed since. They think it’s gotten worse. Their thoughts:

2/25: We still have the conversation with Founders every few weeks if not more often: “How much can you learn how quickly for how much money?” This is even true for first equity rounds which are the bigger problem for us right now. (@iamjakestream)

3/25: The why: Many large VCs are incented to put money to work because in they’re playing an AUM game and need to show their LPs they have access to all the “hot companies”. (@iamjakestream)

4/25: We have the Sisyphean task of convincing Founders that a $5MM seed check out of a $1B+ Fund isn't necessarily going to improve their chances of getting to product-market fit. It buys runway but doesn't always increase optionality --- it can actually hurt. (@iamjakestream)

5/25: Hectocorns! (100x 🦄) Valuations are outpacing our lexicon for exceptional business. We're realizing companies can reach heights nobody imagined possible a year ago. If you want to understand "crazy" seed round pricing, start from there and work backwards. (@Mark_Goldberg_)

How to build a target investor list using Crunchbase. 👇

First, you’ll need Crunchbase Pro. At $25/mo, not bad.

Then, I use Airtable, specifically the Linked Table feature.

Step 1: Go to Crunchbase and search for funding rounds (not companies), filter by relevant categories (for funded org), the right funding type (Eg seed), geo, and then do “announced after” and pick a date 2 or 3 years ago.

These are funding rounds by startups relevant to you.

Step 2: Export list to csv. Make sure you have the “investors” column in there.

Import csv to a new Airtable.

Step 3: Go to the “Investor Names” column > Edit Column Type > Link to another table > Create New (title it “Investors”).

What this does is separate the column by comma and create a new row for each investor in a new table.

Step 4: Go to linked “Investors” table. It should auto have a column w all the linked funding rounds. Create a “count” column on this.

1/16: One business model I talk about frequently with Founders is underbuilding their software as a strategy.

It’s a really powerful concept that can help a product stand out in a crowded market and turbo-charge growth. Unpacked 👇:

2/16: It’s difficult to deny that just about everyone is a user of software on a daily basis. Phones and Computers are just Operating Systems + Pre-Loaded Apps + Downloaded Apps. Apps include streaming services, browsers, spreadsheets and POS software. The list goes on and on.

3/16: But ask yourself this: How many functions do you typically use in the software/apps that you interact with most? Streaming services: Search, create playlists, play. POS software: Add item descriptions and pricing, ring up orders, view reports.

4/16: The concept of purposefully underbuilding software hinges on the fact that there are situations where doing a few things extraordinarily well can be more valuable to an end-user than offering a complete suite of products/functions that are all “pretty good”.

5/16: Truism #1: Solving for all common use cases is more difficult than solving for a specific use case. Solving for edge cases is even more difficult. Going deep with a few pieces of specific functionality is a way of underbuilding to create advantage.

Saturday thoughts on market pull. What is it? How is it different from Total Addressable Market (TAM)? And what ideas tend to have strong market pull?

A thread >>

1) First: "Market pull" != market size.

IMO (and most VCs will disagree!!), market size (TAM) doesn't *really* matter. But market pull DEFINITELY does. For that reason, I've almost never asked a startup about TAM.

Why?

2) First, what is TAM?

TAM is a sizing of how big your market is. A good way to estimate this is - if you can get to all potential buyers and based on how much $$ they are worth to you, how much money can your company make if you took the whole mkt?

3) An example: Say we run an e-commerce site that sells hippo food. TAM in the world:

-1000 zoos have on average 3 hippos = 3000 hippos.
-Each hippo eats $100 worth of food each day
-365 days * $100 * 3000 hippos = $110m per year globally

4) But, we'll come back to this.

Why I don't like TAM - it doesn't take into acct a few things:

A) how hard it is to get customers
B) how much more you can upsell once you have customers
C) how fast the mkt is moving up or down

Introducing “Superpowers” - the underlying skills that help you succeed at anything

I spent nearly 6 months building this list and almost wrote a book on the subject

Instead, I’ve condensed that work into a pithy (and punchy) Twitter thread

**Read On**

Learning.

Learn how to learn. If you do, it unlocks everything else. The deeper your learning practice, the more you can learn.

This is the ultimate superpower: not only can you learn new subjects; you can even learn to change your mind, your preferences and your mood.

Self-Awareness.

Dispassionate self-awareness helps you improve, grow, and be happy.

Feedback is a gift. Inconsistency is growth. The more of your imperfections you accept, the less imperfect you will be.

Delegation.

Many view delegation as the “top” pushing things “down.” That is insane. Delegation is a multi-way street. It’s the essence of capitalism and the reason why you have a roof over your head and a phone in your pocket.

Learn to let others help you so you can help them.

Managing your ego.

When your inner voice controls you, it leads to jealousy, regretful decisions, and low self-worth.

Taming your ego helps purify your intentions. Pure intentions lead to clear decisions. Clear decisions lead to happy outcomes.

Last week, I wrote a thread about generating momentum for startups.

Today's thread is on how emerging fund managers can generate momentum for their fund.

Whatever you do, momentum is so impt to get ppl onboard -- for hiring, for sales, for fundraising.

Read on >>

1) First, why does momentum matter?

Think about it from the "buyer's perspective" -- it is almost ALWAYS better to wait and get more information if you can get the same deal. Right?

More info on a potential investment. More info on a new product. Etc.

2) There are few situations where it's impt to be a first mover.

If you're a product buyer, it could be you have a dire situation at your company that alternatives can't handle.

But if you have a decent alternative (alternative product or alt investment), it's better to wait.

3) That means it's YOUR JOB to create momentum. Whether for fundraising, sales, or hiring.

So with that in mind, how do you generate momentum for fund fundraising?

4) In a prior tweet about generating momentum for startup fundraising, essentially I said to limit your supply (the amnt you are raising) in tranches AND to increase demand by packing in mtgs.

Unfort this doesn't quite work well for funds.

Today's thread is a continuation on *how* you generate momentum in fundraising.

Here's a rough conversation I had with a founder (called 'C') over the course of days a few months back.

Read on >>

1) C: I'm having trouble raising. VC A and VC B are taking so long to get back to me.

Me: Oh, when did you meet w/ them?

C: 3 weeks ago.

2) Me: Oh, are you mtg w/ anyone else?

C: No, I got busy working. I had all these sales calls to make.

Me: That's the problem - there isn't a reason for them to move quickly. There's no investor at the table.

3) C: But I have all these sales calls to make!

Me: I really don't have a great answer for you here. This is probably the hardest part about fundraising - juggling your actual job w/ your fundraising job, which is full-time too.

4) Me: You need to hand off your sales calls to your co-founder. And then you can do mtgs back to back.

C: Ok...

[some time passes]

C: Ok - I'm ready.

Me: How much do you want to raise and what are you using the money for?

A THREAD on how most real estate folks structure deals with outside investors.

Most people utilize the "preferred equity" structure when they raise money from outside investors. They "syndicate" deals.

Here's the basics:

The person (or team of people) putting the deal together is the "sponsor". Also called general parter. Referred to on twitter as the GP.

They find the property, do all the work, hire the management company and take fees. They often co-sign debt and always secure the financing.

The investor is generally passive, doing no work and putting in cash. This is the "limited partner". Referred to on twitter as the LP.

They don't co-sign debt. They simply read reports and ask the sponsors questions and cash checks every month (if the deal is going well).

There are two equity classes.

"Preferred equity" belongs to the LPs. Cash talks, so this is a higher class of shares. They are first in the "capital stack" behind the debt (bank loan).

"Common equity" belongs to the sponsor. They are generally last in the capital stack.

Sponsors generally co-invest. That means they hold both equity classes. A 10% co-invest is standard.

That means the GP has skin in the game. His 10% co-invest makes him both an LP and a GP.