Networking only works when the product being sold via it is top-class. It’s important to get this order right in any career strategy.
In my profession as a VC, I tend to cross paths with many people whose main professional superpower is networking. They tend to be visible at most events, are very active on social media, have at least a surface-level connection with most people who matter in their specific areas, and are likely to say, “You are pursuing this? Oh, I know XYZ who is also in this space really well”.
In most cases, the gigs these folks like to pursue include running communities, creating podcasts, running venture syndicates/ SPVs, GTM consulting/advisory, holding ecosystem events, and engaging with govt. bodies, think tanks & non-profits, etc.
In private, they often confide in me about their desire to take their careers to the next level, both monetarily as well as from an influence perspective. They feel like mere small cogs in the wheel, and despite doing a lot of grunt work, get only a small piece of the pie, with founders, domain operators, and investors grabbing a majority of the value created.
I have thought hard about this predicament, and one conclusion I have come to is that networking skills by themselves aren’t enough. They need to be combined as an amplifier alongside a core set of one or more of the following:
(1) Technical skills
(2) Education & work pedigree
(3) Proven track records in a domain
Without this core, a pure networker is categorized at the lower ends of the business hierarchy by various stakeholders in the ecosystem.
A few examples to illustrate this:
Shreyas Doshi being a great content creator, amplifies his top-tier product management career. Somebody just churning out product content without a proven product track record to back it will be considered a mere content marketer as opposed to a credible expert.
Fred Wilson (of Union Square Ventures) being an excellent writer, gives an extra edge to his proven skills as a VC. Somebody trying to “act” like a VC on LinkedIn & at events, trying to hustle into deals via SPVs/ syndicates without the core skills or pedigree of what it takes to become a solid venture investor, will be viewed as a venture grifter in a few years’ time by the ecosystem.
Ryan Hoover combined his main spike of community-building with his technical chops, both as a founder & product builder, to first create Product Hunt and then parlay it into venture investing via Weekend Fund. Somebody who is just a community creator/ curator, but without any edge-chops at a sector or operating level, will end up only as an amplifier for other companies, founders, and investors, and capture only a minute piece of the value.
I believe this is an important insight that is even more relevant in this age of social media, influencers, and communities. Especially in Tech, both companies & careers seem to be over-indexed on building “distribution” for themselves, without realizing that distribution will work only when the core “product” is top-class.
For any youngsters out there reading this, I urge you to first focus on transforming yourself into a compelling & differentiated “product”, which would typically require studying at the best quality university you can crack, working at the topmost market-leading company in your space, using both these platforms to build core technical skills of some kind, and then continuously executing & refining those skills to slowly & steadily build a track record in your field. This will realistically take at least a decade in the real world.
Only when you have made significant progress toward this goal of becoming a compelling & differentiated “product”, should you then start to focus on building various “distribution” channels for it, with networking & social media being important pillars.
If you get this order backward, there is a significant risk of ending up as a lower-end “ecosystem hustler” who ends up amplifying other companies & individuals that are more compelling products, and the latter end up capturing a lion’s share of the economic pie over you.
Presenting a compilation of my best ideas & observations from 2024, sorted across 7 Chapters.
Happy Holidays to all my readers out there. I have a habit of routinely posting pithy and concise ideas and observations on LinkedIn and X. Topics range from Startups, Venture Capital, and the Economy to Careers and Life.
I feel that many of these get lost over time amidst all the noise on social media. Hence, have put together this compilation of my best ideas from 2024, sorted across 7 Chapters.
Note: this is a compilation of my short-form social posts. My long-form posts for 2024 are available on An Operator’s Blog, accessible via homepage shortcuts by year/ category/ tags.
CONTENTS:
Chapter 1: Startups
Chapter 2: Venture Capital
Chapter 3: Economy
Chapter 4: Careers
Chapter 5: Life
Chapter 6: India
Chapter 7: Other People’s Ideas
Hope you enjoy reading it!
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Chapter 1: Startups
1/ “Closing” People
A simple tip to convert customers/ investors/ potential hires who are sitting on the fence:
Keep coming back to them with monthly/ quarterly updates, showing tangible progress and momentum.
Even the most hardened professionals can’t resist a curve that is trending up and to the right.
If you bug them long enough (ranging from a few quarters, to up to a few years) with positive momentum, you are almost guaranteed to “close” them eventually.
A very powerful technique with a high hit rate.
2/ Thinking Big
I would like to encourage Indian founders building software companies for the world to think significantly bigger and more aggressively both in terms of how large their business can become and how fast can they get there (y-o-y growth targets).
Why? Because software TAMs and market growth rates are much larger than what our brains can imagine. Look at the growth rates of these public companies:
(1) Shopify (Founded in Canada) is growing 21% at $8.2 Billion ARR.
(2) Canva (Founded in Australia) is growing 40%+ at $2.4 Billion ARR.
(3) Toast is growing 29% at $1.5 Billion ARR.
(4) Monday (Founded in Israel) is growing 34% at $940Mn ARR.
I am now encouraging my portfolio founders to think beyond the proverbial “Path to $100Mn ARR” slide and start strategizing a path to hit $1Bn ARR.
It’s time we reset our internal narratives and think bigger and more aggressively as an ecosystem.
3/ Time To Real PMF
In recent conversations with growth investors, a bunch of them asked about my experience on how much time a pre-seed company typically takes to achieve real PMF.
Based on my venture experience since 2011, here’s what I have observed on average for pre-seed companies:
(1) Typical enterprise software/ SaaS in existing markets:
without a major pivot: 3-5 years
with a major pivot: up to 7 years
(2) Category creation plays in software: as long as 5-7 years
(3) Deeptech/ hardware: minimum 4-5 years
I am, of course, generalizing a bit here and outliers could get there sooner. But I feel these numbers are directionally correct.
Moral of the story: it’s a marathon for founders and seed investors. So, buckle up to play the long game!
4/ Investor Updates
Both as a founder in my past life, as well as a venture investor now, I have discovered that writing updates (to investors or LPs, as the case may be) on a consistent cadence over the years is an easily accessible superpower.
What it needs is basic discipline and intellectual honesty, which in turn, come from self-awareness, keeping imposter syndrome at bay, being comfortable in one’s own skin, and equanimity about monthly/quarterly wins and losses.
5/ Speed
If you think about it, the only real advantage a new entrant has against incumbents in any field (be it a startup or even an emerging VC manager) is speed. Speed of decision-making, speed of shipping, speed of learning & iterating, speed of taking risks.
As an upstart, if you aren’t fast, the odds are against you.
6/ Boring Zoom Pitches
The majority of first-pitch meetings tend to happen on Zoom these days. I find remote pitching especially challenging for founders. A big part of venture investing is catching the vibes and personal energy of the founders. That’s super hard to communicate on Zoom.
Leaving the detailed nuances of Zoom pitching for another post, I want to leave founders with this one thought – at the minimum, avoid being “boring”! I have been through too many Zoom pitches where it seems like founders are just going through the motions, pitching in a monotone with an almost deadpan expression, and spending little time or care on breaking the ice and vibing with the other person.
Especially on days packed with back-to-back Zooms, you should assume that the investor is coming in with Zoom fatigue. If you don’t grab their attention and get them to lean in during the first five minutes of the meeting, even though they might appear to be listening and nodding through your monologue, they have mentally zoned out.
So, be interesting, and don’t be afraid of bringing your personality to Zoom. It will at least get the other side to actually hear you out and engage with you, without which, an eventual investment is not possible anyway.
7/ Cold-pitching Your Startup To VCs In 30 SecsAt An Event
For the first 30-sec pitch, I recommend having 3 parts to it:
[The Grandmother’s Explanation]
followed by…
[Social Proof of Team]
followed by…
[Proof of Business]
a) The Grandmother’s Explanation means explaining what your startup does in the way you would explain it to your grandmother. Yes, most investors aren’t domain experts in your field. They are likely investing across sectors and aren’t living and breathing your specific area/ problem statement. Assume they are as ignorant about your business as your grandmother.
I am literally shocked by how most founders can’t explain their startup in simple tech-layman’s terms. Barring a few, true deep-tech startups coming out of research labs and universities, most enterprise software, SaaS, and consumer Internet startups should be able to explain their business in simple words. This is the bare minimum signal of clarity in thinking.
b) Social Proof of Team means talking about your credentials in a straight-up manner, without beating around the bush. These could be:
Education-related – undergrad and grad schools, unique course work etc.
Work-related – past employers, roles, needle-moving projects, accelerators like YC or Techstars etc.
Execution-related – products shipped, content created, social following, word-of-mouth etc.
c) Proof of Business means talking about the business progress of your startup in tangible terms. Things like user base, retention, engagement, number of customers, revenue, customer acquisition etc.
It’s important to remember that while providing Proof of Business, both absolute numbers and growth rates are important. So, frame statements like “we have $Xk ARR, growing y% m-o-m”.
Most startups attending these events don’t have enough Proof of Business yet. For the ones who do, make sure you talk about it as traction trumps everything, and especially at the seed stage, any traction will help you stand out.
For startups who don’t have much Proof of Business, you can still talk about proxies of business progress like the velocity of shipping new features, people on the waitlist, early design partners, and how they are deeply engaging with your product etc.
PS: An important recommendation for the 30 sec pitch format:
If you have compelling traction, pitch [Proof of Business] first and then [Social Proof of Team].
If you are very early and don’t have compelling traction, pitch [Social Proof of Team] first and then [Proof of Business].
The idea is simple – always lead with your strongest suit.
8/ Pitch Decks
I see an overemphasis on creating sophisticated-looking pitch decks at the seed stage.
While an eye-catching deck is always nice to have, have seen terribly basic & verbose decks getting funded simply because the underlying business was super differentiated & therefore, interesting.
PS: this changes at the Series A & beyond stages, where the pitch materials areheld to a much higher bar by larger institutional investors.
9/ Over-capitalization
These lines from a post by Christina Farr on X resonated with me:
“One of the top reasons companies die in health tech is overcapitalization. I can’t tell you how many growth-stage founders I’ve talked to lately who told me they wished they’d raised less and at a lower valuation. Huge problem, rarely discussed.”
This is a smart observation. The underlying reason seems to be that most health tech companies either tap out at a certain revenue scale or tend to grow slower than what enterprise s/w VCs expect. Overcapitalization then artificially distorts execution velocity and/or makes it harder to exit.
This point actually applies to more verticals of enterprise software than folks realize. Many of them can’t support very large outcomes and yet, if they can be capital efficient, can still lead to meaningful outcomes both for founders and early investors.
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Chapter 2: Venture Capital
1/ Liquidity
As a GP, it helps to have gone through some personal experiences that teach you the value of liquidity, why cash is king, and how it’s not around when you need it the most.
This helps develop empathy for your LPs and how unrealized paper gains can’t be used to pay medical bills, take care of kids’ tuition, build homes, and support pension liabilities.
As much as sourcing & picking the best investments, another core job of a GP is to proactively create liquidity for LPs so the cash can be used towards human needs.
2/ Psychology
One of the biggest changes I have seen in myself as an investor over the last decade – I now spend significantly more time studying the psychology of both the markets I am playing in as well as specific individuals I am working with.
3/ 1st-Time vs Repeat Founders
While second-time founders are great risk-adjusted bets, I keep reminding myself that a majority of generational tech companies were started by 1st-time founders both in the US and India.
4/ Non-Consensus-And-Right
2024-25
“Hot” theme of the year: Gen AI
What I have been investing in:
(1) AR/VR
(2) Edutech
(3) Robotics
(4) Drones
Periodic reminder: outlier venture returns are non-consensus-and-right.
5/ Alpha
Given AI is leading to massive competition in every obvious software opportunity, perhaps a good way to improve the odds of true venture returns in the portfolio is to index on “potential for category creation” much more than ever before.
This will require being open-minded to narrative violations, leaning in on products that look implausible/ hard to understand at this point, believing that future winners are unlikely to be simple extrapolations of the past, and having the courage to act on this belief.
However, one thing remains the same. The fundamental traits & qualities of a top-notch founder don’t change across cycles.
So, rather than thematic or market-driven, perhaps a truly “founder-first” venture investing style (backed by a humble admission that it’s hard to predict how markets will evolve over the next decade and which products are likely to eventually win) is better poised to do well.
Founder-first style + looking for category-creation plays = Alpha?
6/ Value-Add
What founders need help with the most is customer intros…
BUT…few investors can repeatably & scalably help with this.
ALTHOUGH…investors can introduce you to connected cliques who in turn, can potentially connect you to customers through a chain of intros.
THEREFORE…a major value add investors can bring to the table is connections to cliques that founders can then mine.
7/ Top 5 Learnings From A Decade Of Angel Investing
(1) Choose a “strategy” ➡️ many can work, focus where you have an edge.
(2) Take enough “shots-on-goal” ➡️ adequate diversification/ portfolio size but watch out for “di-worsification”.
(3) Respect “power law” (few winners will account for the majority of the returns) ➡️ hence, Point (2) is important.
(4) “Access” is everything ➡️ watch out for adverse selection.
(5) Brace for long periods (10+ yrs) of illiquidity to let compounding kick in ➡️ Knowing “when to sell” is going to be super-important, and unfortunately, it is an art rather than a science.
PS: for your own good, see this chart once daily 👇🏽(Source: David Clark of VenCap).
One nuance though is that smaller pre-seed/seed firms can start returning DPI in phases through secondaries in growth rounds, while still holding on to a chunk for harvesting during the eventual main exit (IPO or M&A event).
“Your Fund size is your strategy” holds truer than ever before.
9/ “Access” vs “Picking”
In a venture upcycle, “access” becomes more important.
In a venture downcycle, “picking” becomes more important.
Currently, we are in the latter.
10/ Power Law
Venture Capital is all about “finding the best companies”, not just “doing deals”. The power law is so extreme that the latter almost guarantees failure.
11/ TAM Fallacy
Having very rigid views on TAM at seed stage is a classic VC fallacy. The best founders either create new markets or expand to adjacent markets over time. So the TAM keeps growing.
If a startup remains sub-scale, in most cases it tends to be due to founder motivation, quality of execution and team/culture issues, rather than available market.
At the seed stage, better aspects to evaluate include 1) founder-market fit and 2) competitive differentiation/ right to win (I call it “non-incrementality”).
12/ LP Updates
In an undistorted venture market, valuation markups should always follow operating progress toward PMF. This order got reversed during ZIRP, where markups happened in anticipation of progress.
The right logical structure should ideally, also be reflected in LP update emails from VCs.
The primary section upfront should cover operating updates from the portfolio [revenue, ACVs, product releases, key logos, churn, patents, team additions, etc.].
This should be followed by a “financial” section, positioned as an enabler of the operating progress. This can cover follow-on rounds, mark-ups, runways, etc.
The last 2 years have shown that private valuation mark-ups are transitory anyway. Core operations are the real building blocks that stay and continue to compound across cycles.
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Chapter 3: Economy
1/ Top vs Bottom
With the S&P500 hitting ATHs post the election results, many are wondering if we are at the top.
Sharing my post from last year wherein I covered John Templeton’s framework of thinking about market cycles. As we stand today, it seems to be playing out perfectly. Stage 2 (“grow on skepticism”) seems to have ended and we seem to be at the beginning of Stage 3 (“mature on optimism”). This stage can last a few years, till we reach the “point of euphoria” (the last one being Nov 2021).
I follow the mental models of Charlie Munger and therefore, know that the future is unknowable and predictions have little value. However, I also follow Howard Marks and believe that it’s still useful to estimate where we are in the market cycle.
Enjoy Stage 3 of the cycle!
2/ Liquidity Cycles
The way the world works…
When you really need the capital, no one is ready to give it to you. And when you really don’t need it, they trip over each other to hand you the cheques.
This is the way liquidity cycles work.
Source: hard knocks from multiple cycles.
3/ Mean Reversion
Mean reversion is one of those laws that’s so powerful and yet, is actively utilized as a mental model by only a few. One can see it in everything from stock multiples and startup valuations to BigTech headcount.
If understood and used well, it’s a really powerful tool for scenario analysis and being prepared for various eventualities.
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Chapter 4: Careers
1/ PMF Approach To Careers
My career arc started changing the moment I started trying to figure out:
1) What I am uniquely good at, relative to competition
2) What’s the best way to bring that unique value to the world
3) Who will pay me for it and how much
The key is to approach it like a PMF-finding process for a product, indexing more on “discovery” and “inputs”, as opposed to “outputs” like compensation, title, and career trajectory.
The key is to get the input strategy right, align your mindset, lifestyle, and family goals to it, and be patient enough to execute it for decades, taking feedback and iterating along the way.
As simple as that.
2/ Networking
Whether one likes it or not, networking (I prefer the words “relationship-building”) is a key skill to succeed at anything in the real world, particularly as a founder.
During Web 1.0 and 2.0, the Internet rewarded “volume” of content. But now with AI, anyone can churn volume.
So, what matters now? Hypothesis:
(1) Targeting sharply-defined niches
(2) Going deep into concepts
(3) Keeping a high bar on quality
(4) Sustaining adequate volume while doing #1-3
4/ Clarity
Speed is an outcome of Focus.
Focus is an outcome of Clarity.
Seek Clarity of Thinking.
5/ Make It Interesting
Even if you are writing what you believe is the most helpful (or technical) content on a topic, you still got to make it interesting for readers.
Helpful but boring content won’t work at scale.
6/ Getting On A Plane
Getting on a plane to meet people you are doing business with is an execution superpower that is accessible to everyone.
7/ Urgency
A sense of urgency is a superpower not just for founders but also investors. Unfortunately, while it’s a standard expectation from the former, I don’t see much of it in the latter.
8/ Superpowers
The best career advice can essentially be distilled down into one sentence:
“Find your superpower and double down on it.”
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Chapter 5: Life
1/ Personal Burn
The person/business with the lowest burn usually ends up winning.
2/ Life Is A Marathon
Quick note to all youngsters out there:
Based on what I have seen across the world in my life so far, you should assume that achieving reasonable success at any endeavor in life will most likely require a decade of focused work on that craft.
Account for these timelines as you plan your career (& life).
3/ Immigrant Mindset
As immigrants, we have no choice but to be brutally driven and almost emotionless while making important life decisions.
The reason is that we and those around us have sacrificed way too much. We literally can’t afford this not working out.
4/ Courage
The real arbitrage in the world is “courage”.
Those with courage become owners.
Those without courage serve the owners and make them rich.
5/ Name Dropping
Life has taught me to instantly get my guard up when someone starts name-dropping in the first few mins of a conversation.
6/ Winning
Winning in the short term vs winning in the long term – two totally different things!
7/ Opportunities
As a founder/ employee/ investor, you will likely stumble upon only 2-3 truly asymmetric-upside opportunities in your lifetime. So when you know you have one, try your best to make it count.
Rest of the time is spent grinding towards creating a funnel that hopefully, someday, will get you to these 2-3 opportunities.
8/ Upper Middle Class
The upper-middle-class are the true suckers in an economy:
(1) High enough income to get royally taxed. Yet low enough to keep them on the treadmill.
(2) Not large enough economic outcomes so need to keep aspiring for downside protection for kids (eg Ivy League education). But just enough assets to be able to afford this protection (keep saving in 529 plans for 18 years).
(3) Just enough W2 to put a downpayment and get a mortgage on a “stretch” house. Yet, slow income growth so keep paying the mortgage for 30 years.
A decade back, all Indian VCs were flipping their portfolio companies, especially those in the SaaS/ enterprise space, to the US (Inventus Law was a big beneficiary of this move).
Then, as YC doubled down on India, everyone stopped discussing this issue. Whether consumer or enterprise, if you went to YC, you did a Delaware C-Corp.
Now in the last few years, with Indian public markets ripping and showing a major appetite for IPOs (including SME/mid-sized ones), founders are getting blanket advice to domicile in India to take advantage of this market.
A few things to consider on this topic:
Even in the Valley, IPO outcomes are rare and outliers. Most exits happen via M&A. If you are playing the odds, this is an important idea to keep in mind as global acquirers are generally reticent to acquire Indian-domiciled companies, especially in software. This could change, and I hope this changes going forward, but this is the present state of things.
Indian public markets being gung-ho right now doesn’t guarantee how they will behave after 5-10 years or when you are ready to go public. Though, it’s reasonable to expect that macro secular tailwinds will continue over the next decade.
It makes sense for domestic consumer companies like Razorpay and Groww to re-domicile to India, given their business is domestic consumption-based and they are already late stage/ IPO ready.
Indian public market demand for domestic consumption themes might not necessarily translate to other areas/ sectors in the future. Would Indian markets have an appetite for your specific deep tech or enterprise business N years down the road? Something to think about…
Right now, there seems to be more than enough INR/domestic capital demand for consumption-themed companies across the early->growth->late stage/pre-IPO spectrum of VC/PE. But is that the same case for enterprise and deep tech? Would these companies have a higher reliance on global growth capital in Series C and beyond rounds?
This is a highly nuanced topic and I am not a legal or tax expert. But what I will say is that like most things in business, your specific context as a startup is very important. And many of these calls are extremely hard and expensive to reverse later on.
So, while I can’t offer broad-based/ cookie-cutter answers on this topic, I would definitely encourage both Indian founders and VCs to avoid thinking in broad strokes on this matter, and partner with cross-functional experts to together explore the nuances of each case.
2/ India’s Seed VC Landscape in 2024
From what I am seeing in my deal flow over the last few months (and my focus is (1) enterprise software and (2) deep tech), I feel there is almost a dearth of quality, structured & consistent angel/pre-seed/seed capital in India right now.
From what Founders are telling me, almost all major Indian VC firms seem to be holding out & looking for late-seed/pre-Series A levels of traction even to start a real conversation. The proverbial $1Mn+ ARR, 2-3x y-o-y growth…
Anecdotally, it looks like only previously successful repeat founders are mopping up large seed rounds from these firms at the idea/pre-product stage. Pre-seed/seed seems to be significantly tighter for first-time founders.
Genuine question for myself and many India-based enterprise & deep tech founders out there who are fundraising – who are the angels/ seed firms in India that are comfortable in CONSISTENTLY writing checks at the true early stages in enterprise software and deep tech (idea/pre-product/MVP/design partner/some usage stage)? And by consistent, I mean doing 10-12 deals per year.
3/ Indian Elections 2024
The 2024 Indian elections almost turned out to be another 2004 “India Shining”. Probably the delta this time was the personal charisma of the PM.
The Indian economy is already close to a tipping point so the current govt getting an opportunity to continue the work it started in 2014, for another 5 years is a good sign.
Finally, this election just goes to show that this economy is underpinned by a vibrant democracy that has all the checks-and-balances that the likes of China continue to struggle with.
To global investors – India will continue to lift millions out of poverty, put more disposable income in the pockets of its citizens, build world-class infrastructure and digital public goods, export innovation via its tech startups, and deliver growth that is sustainable for all stakeholders.
4/ Domestic Hardware
Wanted to throw out a challenge for Indian founders – in this next generation of the ecosystem, can we aim to build our own domestic smart EVs to compete with BYD and Xiaomi?
In the last cycle, I had a ringside view into how in smartphones, Indian companies like Micromax and Lava had massive dependence on Chinese OEMs and ultimately, ended up bowing out to OnePlus and Xiaomi.
Given the ambitious goals we are setting for the Indian economy, it’s time we invest towards controlling the hardware stack too. From what I am hearing about all the work already happening in semiconductors, automotive, space and manufacturing in general, this is totally doable if we have the courage.
I also believe that there is enough global capital available that is positive on India and will be ready to back this courage. Or perhaps our Indian conglomerates can also step in there with INR capital?
The role model here is how Sachin Bansal and Binny Bansal stood up to US and Chinese competition in eCommerce, ultimately ensuring a homegrown & enduring market leader Flipkart continues to thrive to this day.
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Chapter 7: Other People’s Ideas
1/ Network Density
As always, massive insight-per-sentence from Fred Wilson on how “density” matters a lot while building networks.
2/ ACV Expansion
The key to ACV expansion 👇🏽
3/ Emerging Managers
For all emerging managers out there who are trying to understand the world of LPs:
This 10X Capital episode on How to Pick Top Decile Venture GPs is awesome. Albert Azout of Level Ventures candidly shares some amazing insights on how LPs evaluate emerging managers, what separates the best GPs from the rest, common pitching pitfalls etc.
4/ Talk Less
This is a very, very important and practical insight for fundraising, or any sales process for that matter. Thanks Hugh Geiger for putting this out there!
(1) “Doing more with less” by leveraging creative thinking.
(2) Moving fast with campaigns to keep up with the speed of culture vs getting caught up in analysis-paralysis and bureaucratic over-planning.
6/ Stay In The Game
If you are going to read one thing today, please read this (especially if you are a parent).
7/ An LP’s Perspective On VC
Nice convo between David Clark (VenCap) and Jason Calacanis. Was interesting to hear a top LP’s perspective on venture capital, manager performance and portfolio construction.
Across a sample of 12,000 companies that VenCap analyzed, only 1% were “fund returners”. Power law in venture is intense.
Venture is a game of finding outliers. The best managers aren’t afraid of high loss ratios. In fact, loss ratios are surprisingly similar across various percentiles of funds. Even the best strike out a lot.
The best managers have the confidence to let their winners run. You might have 1 fund returning outcome in a portfolio of 50 companies so if you don’t let it run, it is a bigger sin than not having invested in it at all.
Breakout private companies with real businesses tend to hold their value. But when these companies go public, VenCap has seen the stock going down by a lot in subsequent years in many cases.
In WeWork, the only people that won were Benchmark (exited pre-IPO with a $2Bn outcome) and Adam Neumann (via secondary sale).
In venture, less capital is more capital. If you get too big, you become more of a capital allocator than a venture investor.
Under-performing managers tend to put more capital into their under performing companies vs the winners. The opposite is true for the best performing managers.
PS: also check out this amazing X thread where David shared raw insights on power law in venture.
8/ Learnings From Scaling To 10Mn ARR! – via Bessemer Venture Partners
Attended an awesome US-India SaaS event organized by Bessemer Venture Partners in Redwood City. Key takeaways below:
Session 1 – Learnings from a decade of building Manychat
Mike Yan shared candid founder learnings from 8 years of building Manychat (a marketing platform for chat eg. IG DMs, WhatsApp etc.), wherein the company had to be completely reset during Covid before reaching tens of millions in revenue at present.
(1) The art of decision-making with limited data:
One of the key jobs of a founder in the 0-to-1 stage is to take strategic direction bets with very limited data. Eg. Manychat pivoted in a specific direction with only 40 beta customers by asking, “Are what these 40 customers doing representative of millions of other businesses?”.
Being able to develop the right judgment even with limited data comes down to how deeply the founder understands the market. To quote Mike – “your mental neural net has to get to the level where you can say with 80% confidence that this is going to work at scale”.
(2) In the initial stages of building products, it’s important to remember that data acts as a rear-view mirror into the past. It doesn’t necessarily show you the future.
(3) Value of focus:
To compete as a startup, it’s important to sharpen your product and business knife by saying no to a lot of markets, features, geographies etc. That’s how you get to a point where no one can compete with you in your sharp niche.
(4) Importance of Events for demand-gen:
Manychat has found holding flagship events to be very successful in demand-gen. The company works with influencers and paid marketing to drive maximum traffic and sign-ups for these events.
Events are also a good internal forcing function around new product launches, feature rollouts, fresh campaigns etc.
Interestingly, Manychat charges a small registration fee to ensure attendees are invested in the event. Also, all the content gets hosted on the event portal. They have found hundreds of people browsing through it daily many days after the event.
It’s important to note that events only work when a product has a basic resonance with the market.
(5) Key to differentiate in a crowded market:
To differentiate as a startup, it’s important to have a clear ICP and nail down messaging just for that ICP, and no one else.
One common mistake is talking about the technology more than the benefits to the ICP. Eg. while most of Manychat’s competitors were talking about how cool Facebook Messenger was when it was launched and where all they could integrate with it, Moneychat’s messaging focused on what its ICP (email marketers) could do with FB Messenger, how they could run a campaign on it and what outcomes they could drive from it.
Session 2 – Selling to large enterprises
Ashwin Ballal, ex-CIO of Medallia, shared the following insights on what founders should keep in mind while selling to large enterprises:
(1) For a customer CXO to take a startup seriously, you must solve a deep-seated personal problem for the exec. Else, it won’t be important enough to warrant their bandwidth.
(2) Every enterprise shouldn’t be a “customer” for your startup. It is important to be surgical and focus on an ICP.
(3) There are essentially only 2 high-priority problems that any customer is looking to solve – (1) growth and (2) cost optimization. A startup needs to hit the core of these problems. Everything else like productivity improvement is a nice-to-have.
(4) Given weak macros over the last 2 years, cost optimization has become so important that CEOs are mandating the CIO and CFO to work together and bring down costs by being willing to adopt cheaper software even with relatively inferior UX.
A new solution has to create a minimum of 25-30% cost savings to have a chance at displacing the incumbent solution.
Customers look at this potential cost-saving both in terms of being able to boost the bottom line or being able to use it for extra headcount to drive growth.
(5) Large enterprises are increasingly looking to adopt “bundled software” to reduce IT costs. They are also looking to transition from per-seat pricing models to consumption-based pricing. These elements are going against specialist incumbents which turn out to be significantly expensive.
(6) There has been a trend over the last decade where software buying decision-making shifted from the IT/ CIO org to functional teams. Now, with capital becoming scarcer and more expensive, cost reduction is back at the forefront, and therefore, CIO/ IT orgs. are again becoming important stakeholders.
Startups often make the mistake of not looping in the CIO org early on in the deal and not building relationships within that team. This often derails deals at late stages. In addition to functional champions, important to have a parallel champion within the CIO org too.
(7/) Nobody is doing AI in production at scale. Most projects are still POC stage so long way to go in the space.
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About the Author
I am Soumitra, a venture investor focused on the US-India corridor. I invest in Global Indian founders via my Fund Operators Studio.
I like to say that “I am a writer in the costume of a VC”. I write about Startups, Investing and Life on An Operator’s Blog. Also check out the AOB Podcast on YouTube.
Seeing my kid get bombarded with activities in 1st grade prompted me to think about the relative importance of ‘discovery’ vis-a-vis ‘focus’.
While conventional wisdom talks about the importance of each in silos, I have come to experience that a healthy mix of both is needed to design a thriving career and live a fulfilling life.
My older son just started 1st grade. As expected with any kid growing up in the Bay Area, he is already being bombarded with tons of activities – from soccer classes & cricket camps to music classes, karate & regular play dates. This is in addition to a school schedule that to me, already looks super intense.
Just 2 weeks into the new school year, I have been compelled to bring up the importance of prioritization with my better half. With work commitments & regular school duties, there is only so much a kid and 2 working parents can get done in 24 hours.
My humble submission to the family has been that we need to be smart in picking our battles. Essentially, have the kid gradually start focusing on a few areas, instead of spreading himself thin.
This predicament has prompted me to look back at my own career and reflect on what I have experientially learned about this topic both directly while executing in my jobs as well as indirectly by observing others around me. In particular, what I have gathered from working with and studying founders & investors I have come to respect.
Reflecting on my journey – the ‘discovery’ part
Growing up, I was the kid who always wanted to try out a variety of things and experiences. Even for a specific school project, I would boil the ocean, reading every book and resource I could get my hands on. While preparing for IIT JEE, I would read every reference book any friend recommended, and try and do every practice test series that looked even remotely relevant.
I carried this same behavior into my professional career. Over a decade and a half, I worked directly or indirectly in multiple sectors (oil & gas, software, medical devices, consumer Internet, eCommerce, SaaS, etc.), dabbling in multiple functions (finance & investment banking, product, operations, strategy, BD, partnerships, etc.), operating across multiple regions (US, India, China, SE Asia, etc.) and stages of maturity (founding my own startup, Series B startup, tech conglomerate, institutional VC, operator-angel).
Luckily, I figured out last year that venture investing is my true calling and this type of career design actually feeds really well into pursuing it professionally. Be it public or private markets, the best investors have a diverse set of mental models and best practices from many different fields meshed in their heads. This helps them to connect the dots in unique ways while evaluating any opportunity, thus giving them the proverbial ‘edge’. The best example of this is Charlie Munger. PS: I wrote about how he thinks in ‘Munger’s Tao‘.
Having a rich tapestry of experience across many areas definitely helped me develop a unique ‘strategic 360⁰ product leader’ positioning as an operator vis-a-vis my peers, and is now helping me carve my path as a venture investor.
Coming back to the earlier retrospective exercise, though this story so far made sense, a specific question still kept bothering me – “Have I missed a trick by not focusing deeply enough on any one area?”.
As we operate in a cluttered and flat global marketplace where everyone has access to almost the same information, and it has become easy to create shallow narratives in any area, I started questioning whether I had peanut-buttered my career to my own detriment.
Reflecting on my journey – the ‘focus’ part
During discussions with some of my friends, mentors, and especially my better half, an interesting nuance hidden in my story was uncovered. Even while hopping across many fields, countries, and skills, the one parallel constant in my life’s equation was venture investing. Since stepping into VC for the first time in 2011, I continued to go deeper into it, studying and practicing it over the subsequent decade.
During 2011-13, when Indian VCs were yet to discover Twitter in a mainstream way, I was one of the most active investors on the platform, trying to replicate the playbook of Valley VCs on it. PS: credit to Shradha of YourStory for encouraging me to get on Twitter during those early days. Twitter has added value to my world in ways that are hard to quantify.
Subsequently, when I stepped out of the VC world and became an operator in the Bay Area, I continued deploying my salaried money into early-stage startups each year, a majority of which was invested in the first round at an idea stage. By the way, this was before it became fashionable to become an angel during ZIRP.
While working intense continent-hopping jobs, I continued to get on calls with founders at 2 AM, trying to work on strategies to save a company on its last breath. In between building products and founding a startup, I strived to keep making myself better as an operator-angel by studying the journeys & frameworks of the likes of Semil Shah (totally in love with his blog), Elad Gil (substack), Jason Calacanis (love his old but raw Angel Podcast episodes), Ron Conway & Pejman Nozad.
Purely as a result of following my natural curiosity, I had inadvertently ended up focusing and going extremely deep into the craft of venture investing.
Balancing ‘discovery’ and ‘focus’
Connecting the dots now with my kid’s 1st-grade predicaments, there is an idea here from my journey that I believe is relevant. Careers (and life) are about a balance between ‘discovery’ and focus’. While conventional wisdom talks about the importance of each in silos, I have come to experience that a healthy mix of both is needed to design a thriving career and live a fulfilling life.
It’s important to have enough room to discover – try different things & test different ideas, while still striving for focus and actively looking for leading signals that indicate what to focus on.
The relative proportion of discovery and focus will be dependent on each person’s context. While most kids and youngsters will naturally have a high proportion of discovery, we also know prodigies tend to start focusing really early in life (Tiger Woods took to golf at 6 years of age; Warren Buffet bought his first stock at age 11).
People in the middle phase of their careers typically tend to gravitate more towards focus, trying to climb the ladder at a specific company or type of job. A counter view would be that many of them would do well to increase the proportion of discovery in their careers, in order to get to a global maxima.
Folks in the latter phase of their careers organically become experts at something, thereby increasing the proportion of focus in their lives. A view worth considering here is whether increasing the proportion of discovery in their careers might help avoid getting jaded and bring in fresh perspectives into their field of expertise.
There are no right or wrong answers here. Everyone will need to find their own balance considering their holistic context – age, location, family structure, social setting, and economic circumstances. Although, just based on a sample size of 1 (i.e. my journey), is following your natural curiosity a good way to organically evolve an optimal mix of discovery & focus? Perhaps…
To close out, I would like to share a pictorial representation of this idea of balancing discovery and focus. I tend to think of ideas & mental models in terms of pictures; I guess there is some merit to that age-old wisdom of “a picture is better than a thousand words”.
To me, this balance can be represented as a free-flowing river being directed by its banks. The middle of the river is in discovery, having enough room for the water to go in any direction, form vortexes, change color, and experiment with constituents like soil, mud, rocks, etc. But, the banks give the river focus, ensuring it stays on a desirable path, moving within specific boundary conditions and ultimately, meeting its true calling of merging into the sea.
As a parent, I hope to be the river bank that provides focus to my kid’s discovery. As you reflect on your own journey, how might you strike the balance between discovery and focus in your career and life? Are there areas where you feel the need to freely discover more, and others where honing your focus could lead to breakthroughs? Would love to hear your insights and experiences in the comments below, or on LinkedIn and Twitter.
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Do you know what’s common between Shaq’s investment in Google, Ryan Reynold’s success as a marketer, the business dominance of Ivy Leagues & Peter Thiel’s investment in Facebook? A phenomenon I call the Success Flywheel.
In this post, I unpack this concept, including ways you can kickstart your own Flywheel.
Shaq revealed the story behind his Google investment during his appearance at TheEllenShow a few years back. Apparently, he was hanging out at the Four Seasons in LA & started playing with a bunch of kids at the next table. In his own words – “I felt like I was babysitting this guy’s kids while he was in a meeting”. As it turned out, this stranger (Shaq didn’t disclose who he was) eventually let him into the Google deal.
Now, knowing Shaq’s storytelling skills, am sure this story is a bit jazzed up. And given he was already an NBA star in 1999 (he would go on to win his first ring in 2000), obviously this stranger must have recognized him. But even discounting for these possibilities, it’s clear that some amount of serendipity was definitely involved – meeting an important investor in a famous watering hill located in a powerful city led to him accessing a once-in-a-lifetime deal.
As you digest this, let’s cut to a similar story of another star, this time in Hollywood. Ryan Reynolds is now considered one of the savviest marketers & investors around. Look at his track record:
Became the brand personality for Mint Mobile, reportedly taking a 25% stake in the company. Mint recently got sold to T-Mobile for $1.35Bn!
In 2018, started promoting Aviation Gin and also took a stake in the company. The company was purchased two years later by Diageo for $600Mn.
In late 2020, co-bought a struggling fifth-division Welsh soccer team for 2Mn pounds. Used his marketing chops, including creating a Hulu documentary, to turn around the club’s attendance & revenues. It is now a thriving organization.
So, how does an active movie actor get access to deals that would be the envy of major private equity funds? And not just one-off – he keeps getting invited to the best deals one after another.
This is what I call the Success Flywheel at play. While the above are outlier examples related to top celebrities, I have seen the Success Flywheel working countless times both in my own career as well as those around me:
Repeat founders with prior success get access to the most venture dollars from the best investors. The other side of this coin – VCs with successful track records keep getting preferential access to the best founders.
The best recruiters (consulting, banking, investing, big tech) visit only the top campuses in each country for placements. So, these students get preferential access to the best jobs. And the flywheel doesn’t stop there – once you have any of these top logos on your resume, they act as preferential filters for subsequent jobs.
Early success brings folks to major economic centers like the Bay Area, NYC, London, Bangalore & Shanghai, either to study or work. Just by participating in the natural flow of information & people in these hubs, they get exposed to the best opportunities.
Morgan Housel of Collaborative Fund has a similar observation in his awesome post “Tails, You Win“:
The Success Flywheel is like a law of nature because it stems from fundamental human behavior. Across countries, cultures, sectors or even historical eras, at a fundamental level, humans are wired to maximize risk-adjusted returns while doing deals. Very crudely, there are 2 ways to do this – increase the numerator (return) and/ or decrease the denominator (risk).
Equally importantly, time is finite so people are looking to get to the most optimal risk-adjusted option, as efficiently as possible. This gives rise to the concept of “access” – how does one get in the flow of these people looking to do the best deals? ‘Cos they will quickly choose from people in their natural flow.
Having a prior event of success helps in getting repeated access to this flow as it creates a strong credentialing signal that plays really well to a crude heuristic that the human brain often uses – “if the person has been successful before, they are more likely to succeed again”. This signal drives 3 kinds of access: (1) Inbound (“I should talk to X”), (2) Referrals (“you should talk to X”) and (3) Serendipity (“have you met X?”).
1/ Inbound
The more socially-visible & externally-validated the prior event of success is, the more broad-based inbound access it drives to various kinds of flows. People looking to do deals proactively reach out even without any significant outbound effort (trying to sell yourself). Hence, visibly successful founders, investors, leaders, celebrities & experts keep getting access to opportunities.
This is also why conventionally successful professionals in any field still continue to productize & distribute themselves, building their personal brand & constantly growing their reach via networking, blogging, tweeting or starting podcasts. Putting oneself out there drives familiarity, which is key to inbound flow.
2/ Referrals
Everyone in these flows is typically in a consciously-cooperative mode, trying to optimize risk-adjusted returns for each other via referring opportunities, in the hope of future reciprocation. So, if a person has a prior event of success & on top of it, is also well-networked, it turbocharges referral-based access.
There is also a mini-flywheel at play here where a success event attracts people to your network, which drives referrals & more preferential access, thereby leading to more potential success & so on.
3/ Serendipity
Finally, even if you are not proactively looking for certain kind of opportunities (am sure Shaq wasn’t sourcing venture deals full-time), just being in the right flows puts you in the vicinity of serendipity that can take you in directions you never imagined. Shaq being at the LA Four Seasons at exactly the right time was the result of his outlier success as a basketball player, not his proactive networking skills.
The halo effect of success in one field generally transfers to other adjoining fields as well, which can drive massive serendipitous upsides. For eg. Peter Thiel’s track record as a co-founder of Paypal put him in the flows of Mark Zuckerberg in 2004, helping him become the first investor in Facebook. Or Jeff Bezos was able to invest in Google while it was still in the garage, courtesy of his success with Amazon.
Now the million dollar question – how does one leverage the Success Flywheel?
It starts by putting in the work to get your first event of success. The sooner the better so a sense of urgency goes a long way! And the good news is – unless one is born to privilege, most people start from scratch and build towards their initial success.
An event of success could be anything from cracking a top university, getting a coveted internship in a hot field, hustling into a brand-name job, hitting milestones with your business, creating a new product with buzz, publishing a paper, joining a board, building a social media following or just about any accomplishment in your context. Big or small matters less, it’s about getting a win on the score board to get the flywheel going.
While you are putting in the work towards your goal, also build a distribution network in parallel. This includes deep relationships & loose networks, both in the physical (IRL networking) & digital world (social media).
Once you get to that event of success, leverage your distribution network to amplify its impact. Make sure your success is visible, validated & shared in the ecosystem.
As Inbounds start, connect with people authentically, leave a good impression & look to solve problems for others.
To jumpstart Referrals, start using the tools & resources that typically come with success, to disproportionately give back to the network.
To leverage Serendipity, follow the golden rule of “showing-up” everywhere – meetings, events, calls, webinars, conferences, mixers, even birthday parties. PS: if you find networking at events a huge pain like me but still want to get better, check out my post “Networking at Events for Introverts“.
TLDR: the way to get a Success Flywheel going in your life is to first put in the work with a sense of urgency, and create an event of success, big or small. Once you get this event, make sure you “distribute” it well and ensure its compounding by continuous learning & effort.
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As I started experiencing both time & mental bandwidth constraints, especially post becoming a parent, I started thinking through the golden question – “How do I get more leverage in my career?”.
Sharing 3 main forms of leverage that I have identified during my journey in tech as an investor, operator & founder.
The way I design my career completely changed when my first son was born in 2017. From the day I graduated from IIT, I implemented what I call a Brute Force strategy to climb the career ladder. The idea was to basically outwork everyone – worked deep into the weekend during my investment banking days, did every possible hustle during the venture capital gig, and was on a plane 15-20 days a month for 5 years at Alibaba, literally doing a round trip of the world (SF – Hangzhou – SEA – India – back to SF via EU).
Everything changed once a parallel day (& night) job landed on my plate – that of being a parent. Relative to Asia, raising kids in the US is especially hard given there are no support systems to fall back on, especially for a 1st gen immigrant like me.
The easy choice, of course, would be to step off the gas a bit, realign professional goals & essentially, accept the trade-off of more personal time & lower professional outcomes. And many at this life stage end up choosing this option.
But then, I have never been the guy who loves the easy way out. I set out to answer the golden question – “How do I get more leverage in my career?”. Essentially, figuring out ways to significantly improve the ratio of output (value created) to input (time & mental bandwidth invested).
Give me a lever long enough and a fulcrum on which to place it, and I shall move the world.
Archimedes
As I churned on this topic in my head for a year or so, Naval Ravikant posted his now legendary “How to get rich (without getting lucky)” tweetstorm in 2018, where he wrote about leverage as one of the key ideas.
Fortunes require leverage. Business leverage comes from capital, people, and products with no marginal cost of replication (code and media).
Naval Ravikant
Having worked in tech as an investor, operator & founder, I had the opportunity to observe various forms of leverage at play from close quarters. Some examples that hit home hard for me over the years included:
I discovered legendary VC Fred Wilson’s “AVC” blog during my first year in venture capital. It blew my mind that Fred had been consistently blogging on startups & investing since 2003 when at the time most Indian VCs didn’t have a Twitter account. Cut to today, Fred still continues to write on the same AVC domain!
These examples highlight 3 main forms of career leverage I have come to identify in my journey. I call them the 3Cs – Code, Capital & Content.
1/ Code
Code is the strongest form of leverage that has come into existence in the last 50 years. It started from the days when one had to have access to a University with a Punch Card machine, just to run simple programs. Then, Apple and Microsoft together brought computers to regular homes, but coding languages were still complex & needed expertise. As personal computers got more powerful, the open-source ecosystem of programming languages started thriving, creating much broader access to software programming across the world (from s/w products in Silicon Valley to IT services in India). Now, with the rise of generative AI, it wouldn’t be a stretch to say that almost every knowledge worker can code & create products without deep expertise in specific languages.
Code provides game-changing leverage. Over the last 20 years, anyone with a decent laptop and an Internet connection could build a SaaS business, become a freelance developer, or get hired by a large tech company at extremely attractive salaries irrespective of location, background, or past credentials. As opposed to hourly jobs in the industrial age, coding just for more hours doesn’t necessarily translate into better outcomes. Quality of problem-solving matters much more than the quantity of hours, which is what gave rise to the 10x engineer phenomenon.
As someone who had neither the skillset nor the mindset to code, this extremely powerful form of leverage has always been out of my reach. That’s why I am particularly excited about how AI will make coding so much more accessible. At the minimum, it will both increase the global base of developers, as well as significantly enhance the productivity of the best ones (the 10x engineer now becomes a 100x?).
Given coding hasn’t been available to me as a leverage point in my career, I have had to double down on the other 2Cs, as I will explain below.
2/ Capital
Using capital to own assets is the oldest form of leverage that continues to stay powerful. The Vanderbilts made their fortune owning railroads, Carnegie in Steel, the Waltons & Jeff Bezos in retail, Buffet & Munger in owning full businesses as well as investing in stocks, Jobs & Gates in tech, Templeton, Soros & Jim Simons in public market investing, Stephen Schwarzman & Henry Kravis in Private Equity investing, and Don Valentine & John Doerr in Venture Capital investing.
Capital can be used to buy ownership in Real assets as well as businesses. The former benefits from scarcity (land is finite on this planet) & gives double-dip benefits of monthly cash flow + equity appreciation. But personally, I find the latter more interesting, purely because great businesses become long-term compounding machines, providing the prospect of exponential returns that Real assets can’t match.
As an example, Microsoft’s market cap has grown from ~$270Bn to $2Tn+ in 20 years. For any part owner via stock, everyone from Bill Gates to Steve Ballmer & now Satya Nadella has been putting in the work to give shareholders ~17% annualized returns.
Of course, the most powerful route would be to use your “sweat equity” & start a business, but that’s typically not an optimal option for most people.
Given my significant experience in banking & venture investing, I have gotten the most exposure to Capital as a form of leverage & ways to harness it across asset classes. In addition to developing expertise by working across institutions, investing in both public & private markets has also become my personal passion over the years. In a very organic way, I have always turned to the lens of markets & investing to decode life & human behavior.
As a result, I have doubled down on leveraging Capital to acquire ownership in businesses as a core form of leverage. I have been investing in tech startups for more than a decade, & plan to keep doing it for the rest of my life. My simple pursuit is to identify the best founders out there, & I believe this is where my professional Alpha is!
Compared to Code, Capital-based leverage is relatively hard to acquire. Accumulating own capital takes time & being able to manage other people’s money has a really high bar of trust, reputation & accountability.
The good news is – you can start young & with small amounts of capital. Compounding is your friend and as long as you are determined to save & deploy on a continuous basis for decades, every small step adds up. And sooner or later, my favorite model of “you only need to get a few right” kicks in, wherein a smart decision every few years will create a step function in your portfolio.
The first $100,000 is a bi**h, but you gotta do it. I don’t care what you have to do – if it means walking everywhere and not eating anything that wasn’t purchased with a coupon, find a way to get your hands on $100,000. After that, you can ease off the gas a little bit.
Charlie Munger
3/ Content
This is the newest form of leverage, & one of the most exciting ones. Pre-Internet, there were many gatekeepers in the way of getting ideas heard. Most regular people had almost no access to traditional media. One needed relationships with publishers & power brokers to put anything out in the market. Participating in a high-quality exchange of ideas happened within tight cliques – scientific, university, neighborhood, racial, socio-economic, etc. Essentially, the common man was blocked by “access”.
The Internet changed everything. Anyone could build a website to publish their ideas. With search engines, this content became discoverable by anyone across the world. As social media got created, distribution became turbo-charged with authors able to create holistic personal brands & interact with very specific audiences for their work. Now, powerful phones & software have transformed authors into “creators”, arming them with light-weight studios to create various forms of media, from vlogs & podcasts to tweets & reels.
I started writing online in 2011, mainly via blogging & tweeting. Over the years, my conviction in Content as a powerful form of leverage has only increased with time. As anyone who has taken a new product to market knows, it’s just not enough to have a great product. Communicating with your audience in a way that makes the product resonate in their minds matters the most. Case in point: Apple’s legendary 1984 Super Bowl commercial introducing the Mac (& in the process, convincing the audience that IBM is obsolete!). Even a product genius like Jobs spent an inordinate amount of time thinking about marketing (check out this snippet from Jobs on how he simplified Apple’s marketing message).
To me, the ability to influence human minds with your ideas is a superpower like no other. Writing & putting content out there helps me engage with people I would have never met otherwise. It helps me attract people with similar values, with whom I can solve problems. It helps me have a conversation with them even when one of us is asleep, or in a different time zone, or even when the encounter happens many years after the actual writing.
Early-stage investing is a long-tail game, with thousands of new startups getting created across the globe & tens of founders in the pipeline at any point in time. I realized very early that real-time meetings are unscalable, especially at my life stage, & that demand-gen is key.
Content is arguably the most scalable form of human interaction, with its engagement & subsequent impact reverberating for years & sometimes, generations (in the case of the best books). In fact, this post itself is a perfect example, wherein I have shared links to an Apple commercial from 1984, a Steve Jobs speech on marketing from 1997, and a Wall Street Journal article from 2000.
My belief is that Content in many ways provides more potent leverage than Capital – money can’t buy the best ideas, but the best ideas can attract money. And this friends, is why I write!
To summarize, employing various forms of leverage is key to creating large professional outcomes. As you design your career, think about proactively layering in one or more of Code, Capital & Content into it & equally importantly, commit to doing it over many decades.
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Earlier this year, my younger son got admitted to the same preschool that the older one attended in SF. As parents, we were elated! Our older one loved this school, we know the Principal and teachers really well, and it significantly reduces uncertainty for us given this school goes up to Middle. A win-win in every respect!
Except, we were caught completely off-guard by how the first few weeks turned out. That the kid was having “adjustment issues” would be an understatement. Everything from sleep schedules & toilet training to eating & social behavior went majorly South. While this is normally expected when kids change schools, what surprised me was how much this derailed us as parents. We were maniacally struggling to manage the kid in this transition while trying to cope with all the mood swings & changes this was bringing to our daily routine.
Of course, things started improving after a couple of months & as we speak, the kid seems all settled in the new environment🤞🏽. But I couldn’t stop introspecting on why we got caught so off-balance in this episode, even when we knew the school intimately & had gone through this exact experience before with our older one?
This was a manifestation of what I call the Familiarity Conundrum. When we deal with things we are intimately familiar with, there is a double-edged sword at play. While familiarity arms us with high-fidelity, experiential data that can be incredibly useful in making a smart decision, it also creates overconfidence-driven blind spots in our ability to deal with the familiar.
In highly familiar situations, our brain tends to short-circuit the decision-making process, perhaps gathering comfort from past anecdotal experience regarding similar situations. The result is a quick decision based on 1st order thinking. We went through this in the above school episode – our brains used a quick, 1st order heuristic – “because this school was so great for our older son, it will be equally good for our younger one too”. We failed to ask even a basic set of questions regarding this decision eg. are the teachers the same this year, is our younger son starting at the same age as the older one, should we expect any changes to the school routines post-Covid etc. These are basic diligence questions that we would have definitely tried to answer had this been an unfamiliar school for us.
This Familiarity Conundrum often leads to sub-optimal decisions in other aspects of life as well. Some examples that I have personally experienced or witnessed:
When hiring someone we are highly familiar with eg. an ex-colleague or classmate, our brain tends to unfairly magnify our last, dated view of their strengths, not pushing us enough to evaluate them independently, especially with respect to fit with the current opportunity.
When a trusted person introduces us to a deal, say an investment opportunity, our brain wrongly transfers trust with the referrer onto the referred deal, without a rigorous evaluation of the deal on a stand-alone basis as well as the referrer’s true competence in the specific area being evaluated.
When operating in an area where we have prior work experience, we tend to under-diligence the opportunity & overestimate our likelihood of success. In areas of perceived expertise, our brain doesn’t push hard enough on 2nd & 3rd order thinking like figuring out ways in which this context is different from our prior experience, trying to see around corners for lurking risks etc.
So what can we do to effectively deal with this Conundrum? Based on what I have learned from my experience as well as studying great rationalists like Charlie Munger, here are a few ideas:
1/ First step is spotting it at the right time – training your mind to spot times when familiarity could be creating blind spots for you, is itself a major part of keeping biases at bay. Personally, I tend to keep a matrix of such mental models both layered in my head as well as often as part of a diligence checklist. For decisions that cross the bar of impact and/or irreversibility, I like to run them through this matrix to check for potential blind spots.
2/ Don’t deviate from the “checklist” – Dr. Atul Gawande argued for the importance of checklists as a tool to make surgeries safer in his popular book “The Checklist Manifesto – how to get things right“. Professionals as diverse as surgeons, pilots & public market investors leverage checklists to handle uncertainty & make better decisions under stress.
The key is not deviating from your operating process even when the context is highly familiar and your brain is pushing you to use crude heuristics to arrive at a quick decision. Like a pilot who will diligently run through the aviation checklist even on the best-weather days, one needs to strive to do the same, each time, every time while taking high-impact decisions.
3/ Always have an independent feedback mechanism – even in areas where you believe you have deep knowledge and/or extensive on-ground experience, it’s always good to get feedback from independent players who are likely to see the opportunity in an unbiased way.
During my early days as an angel investor, I had a tendency to predominantly rely on my own judgment of a startup & often made decisions without taking the time to gather feedback from other sources. Having learned from several missteps, I have now incorporated gathering feedback from several sources including market experts, customers, founder references & other investors, as a core part of my investing process.
In this context, I find the idea of having a “feedback buddy” incredibly useful. For important projects eg. buying a house, a product launch, a big investment, it’s good to have someone who is unrelated to the project be a sounding board to bounce off ideas, poke holes in current thinking & simply provide common-sense feedback.
The bottom line is this – as opposed to explicitly unfamiliar terrain where our natural survival mode gets alerted, familiar contexts are significantly more likely to get our brains in “lazy thinking” mode, creating blind spots that will catch us off-guard. Proactively spotting this dynamic, having the discipline to stick to a rigorous process at all times & consciously incorporating an independent feedback mechanism within it, goes a long way in offsetting this Familiarity Conundrum.
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Growing up in India, where inherent chaos makes sure most things don’t go according to plan, I got organically trained to always have a Plan B. The classic fallback option – the bylane you take when the main road is clogged because a minister is scheduled to pass through, the backup college seat you block in case you ranked low in the entrance exam for your top preference, or the autorickshaw you hail when the car refuses to start.
Look, I get it! Now that I am a father to 2 boys, I see the instinct parents have to ensure their children are tangibly & emotionally “safe” in all situations. So, I can appreciate why my middle-class upbringing was designed this way. To top it up, my technical education & early analytical jobs further pushed me into the world of scenario analysis & fail-safes.
Down the road, as I entered the risky world of startups, I naturally brought this instinct with me. While building, operating & investing in high-risk-high-reward endeavors, my animal brain would always push me to have a Plan B in my backpocket:
If this startup doesn’t work, I can always go back to Company X.
What if this investment fails? Let me spread my resources & take a smaller bet.
If I don’t like living in Country Y, I can always go back to India.
A few years into taking these asymmetric bets (presumably backed by Plan Bs), I expectedly started encountering failures, both big & small, one after another. They ranged everything from major projects going South & unforeseen external risks coming to the party to unexpected company restructurings & gross misjudgment of certain people’s skills & intent.
During a recent introspection of these adverse experiences, something interesting jumped out – every time I attempted to call on a Plan B for a specific situation, more often than not, it wasn’t really there. In some cases, the “backup” companies had changed their strategy & weren’t a fit anymore. In others, I had grown in a different direction & going to a fall-back option would be a negative step. Many times, people I was relying on to help materialize a certain Plan B had either fallen out of touch, were themselves dealing with adversity, or had changed their context & therefore, relevance.
So this was my lightbulb moment that inspired this post – in high-risk-high-reward situations, Plan Bs are….fictitious. The very nature of extremely risky situations is that they take you in unpredictable directions, change your context in unimaginable ways & leave you with baggage that’s hard to foresee. And all this happens in parallel to a rapidly-changing external environment that in most cases, becomes increasingly incongruent with your endeavor (most asymmetric projects are by definition, contrarian in relation to established rules of the game that the majority operates by).
This complex system renders even the most thought-through Plan Bs useless. Given asymmetric bets are driven by power laws (a few will drive a majority of the total outcome) & compounding (need a long enough timeline for ideas to mature, which is when outcomes start growing exponentially), positioning yourself to be on the right side of these rules requires going all-in for a significant period of time.
While having a Plan B provides the initial psychological space to initiate a risk, in my experience, it unfortunately also creates a mental mechanism to cop out of it, & even worse, often doesn’t provide the safe landing space it initially promised.
Going forward, my aim is to ditch the “Plan B” mindset in all asymmetric bets. A fall-back instinct comes from a place of fear, and while controlled fear can be a useful tool to drive alertness & urgency, it becomes adverse when acting as a roadblock to going all-in & persevering on a thoughtfully-chosen path.
It’s important to add here that while ditching the Plan B outlook, I will still proactively focus on avoiding the Risk of Ruin at an overall life level. Asymmetric bets require multiple shots at the goal & therefore, safeguarding the ability to keep playing is paramount.
On a related note, a mental heuristic I have recently started using while making asymmetric decisions I am 50-50 on – “which option is the fear side of my brain asking me to choose?”. In most cases, I then lean towards the other option!
I have found the following quote by Swami Vivekananda to be hugely inspiring in driving this mental transformation:
Take up one idea. Make that one idea your life – think of it, dream of it, live on that idea. Let the brain, muscles, nerves, every part of your body, be full of that idea, and just leave every other idea alone. This is the way to success.
Swami Vivekananda
As you consider this approach, I want to leave you with this outstanding scene from Christopher Nolan’s ‘The Dark Knight Rises’. As a frustrated Bruce Wayne is trying to catch his breath after yet another failed attempt at climbing out of the pit (he was using a rope each time), an old & wise prisoner gives him the mantra for successfully making the climb:
You do not fear death. You think this makes you strong. It makes you weak.
How can you move faster than possible, fight longer than possible, without the most powerful impulse of experience – the fear of death!
Make the climb…as the child did. Without a rope!
The Dark Knight Rises (2012)
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As a long-time student of Charlie Munger, I eagerly wait for his musings at the Daily Journal Shareholders Meeting every year. This time was no different! Here are some of my notes capturing Charlie’s wisdom at the DJCO 2023 meeting:
Importance of under-served markets in software
Both Munger & Buffet are big believers in moats. Having witnessed the natural creative destruction of even the best companies like Kodak & Xerox, they understand the power of competition & what it can do to long term returns of investors.
Munger spoke about how the software business of DJCO, which offers a solution to automate legal courts, is operating in a large yet unaddressed market that incumbent software companies hate. It’s an unsexy business that has long sales cycles & as Munger himself said – “it will be a long grind”.
However, these same reasons also limit competition in the space. Munger believes that this combination of a large, underserved TAM + low competition is likely to drive superior long-term returns, as long as DJCO shareholders are prepared to ride through the grind & hold over the long term.
In my view, this idea also has some interesting insights for venture investors in the enterprise software/ SaaS space. Too often, investors start chasing the hot market of the year without realizing that a space that is obviously popular will end up attracting disproportionate competition & investor $$. And as history shows us, too much competition in a market drives down returns for everyone.
Therefore, there is some merit in looking at startups going after unsexy or under-served verticals. These non-obvious nooks & crannies often hold the most potential for contrarian-and-right bets.
2. Holding is tax-efficient
Munger spoke about how he hates to sell his holdings as California would straight-up take 40% away in taxes. As he went on a brief rant about how California is driving businesses away with its tax policies, the underlying insight stayed with me – how holding securities over the long term is a brilliant strategy for tax efficiency. A simple rule that anyone from Berkshire & DJCO to common folks like you and me can follow in our lives.
As the likes of Robinhood have leveraged the excess liquidity environment over the last several years to create a generation of young day traders, many of them don’t realize how tax-inefficient frequent trading is.
3. #1 bias is denial
When asked what the #1 behavioral bias is, Munger said “denial”. And it’s so true. Often times, when the present reality is too brutal to bear, our brain tricks us into living in a delusion. While this stems from an evolutionary survival mechanism our brains have developed, taking major decisions under this denial state can cause havoc in our lives.
Proactively trying to see & live in one’s reality at any point in time is the best way to behave rationally. If one thinks of all of grandma’s wisdom handed down to us in popular sayings (eg. “live within your means”), they all urge us to recognize & live within our own realities.
4. Betting big when the right opportunity knocks
I loved this sentence from Munger – “What % of your networth should you put in a stock if it’s an absolute cinch? The answer is 100%”.
While I am positive that Charlie wouldn’t like this to be construed as a stance against diversification, which is important for almost all portfolios in varying degrees, the spirit of this sentence is this – a few times in your life, you will come across a no-brainer opportunity with massive asymmetric upside. It will happen very infrequently, but when it knocks on your door & you are convinced about it, go all in & bet really big. Over a lifetime, these bets will drive the majority of your returns, financial or otherwise.
If there is one thing that separates the likes of Buffet & Munger from other investors, it’s the mindset of betting really big when the odds are extraordinarily in your favor. During the meeting, Munger mentioned how Ben Graham made 50% of his money from just 1 stock – GEICO. Also, he illustrated the importance of power laws by sharing how Berkshire’s initial $270Mn investment in BYD (made in 2008) is now worth $8Bn!
Munger admitted to having used leverage to buy Alibaba stock in the DJCO portfolio. When asked why he violated his own rule (his famous quote being “there are only 3 ways a smart person can go broke – liquor, ladies & leverage”), Munger responded with another fascinating quote:
The young man knows the rules. The old man knows the exceptions.
Charlie Munger
The insight behind this is something I say a lot – context is everything! Rules & checklists are great for driving overall discipline & avoiding foolish behavior but as Munger demonstrates, it’s not wise to become a prisoner of your own rules. With experience, one should learn to spot exceptions & when the context is favorable, be bold enough to break the rules.
6. On long-term economic trends
While both Munger & Buffet generally hate to predict macro trends, Charlie mentioned a few interesting observations:
-Inflation is here to stay over the long run, given most democratic govts. globally have shown an ever-increasing inclination to print money.
-Most govts. across the world are going to be increasingly anti-business, with tax rates steadily going up.
-If one looks at economic history, the best way to grow GDP per capita is to have property in private hands & make exchange easy so economic transactions happen (the essence of capitalism).
If these trends are even directionally true, it makes sense to hold assets that can fight inflation (eg. stocks), as well as invest in a tax-efficient way, over the long term. Developing an investor mindset that can operate in a high-inflation environment will be important.
7. The playbook for success in life – Rationality + Patience + Deferred Gratification
When asked the thing that’s helped him the most in life, Munger said – rationality! Loved this line from him:
If you are constantly not crazy, you have a huge advantage over 90% of people.
Charlie Munger
To significantly improve the odds in your favor, Munger prescribes combining 3 things:
-Rationality (which is often, just doing the obvious)
-Patience (take advantage of compounding)
-Deferred gratification (live within means, save & invest)
Like most things Munger says, the above ideas are simple & profound, yet hard to consistently follow for most people as their biases come in the way.
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You know, the ideas that I have had in my life are quite few. But the lesson I can give you is, a few is all you need, & don’t be disappointed.
When you find the few, of course, you have to act aggressively, that’s the Munger system.
Charlie Munger
As I was ruminating on blogging about my experience of this idea, Warren Buffet did a timely reminder in the recent Berkshire 2022 Shareholders Letter:
The lesson for investors: The weeds wither away in significance as the flowers bloom.
Over time, it takes just a few winners to work wonders. And, yes, it helps to start early and live into your 90s as well.
Warren Buffet
The idea that you only need to get it right a few times in order to lead a rich life is so powerful! Through it, Munger & Buffet also underline the importance of power laws in almost everything worthwhile. That a few decisions & outcomes will drive most of our respective lives.
About a decade back, this idea was an intriguing concept for me, but only at an academic level. Since then, I have experienced, & therefore internalized it, across multiple aspects of my life. Even though I would consider myself a perpetual hustler who has worked in 8 companies, tried multiple functions across diverse industries, lived in many cities across US & Asia, and invested in 20+ startups, I can boil down where I am in life today to a handful of decisions that acted as step-functions:
Where I ended up studying for undergrad, as that’s where I met my (future) wife.
Pursuing & marrying her several years later.
A cold email to a VC firm that eventually became my entry point into tech.
Deciding to move from India to Silicon Valley with no job in hand, no existing networks, with just faith that I will figure it out.
Casually meeting the husband of one of my wife’s friends back then, who eventually led me to join Alibaba.
That’s it! If I take any of these decisions out of the equation, my life would look very different.
At a more specific level, I see this dynamic play out in my angel portfolio too. I have been investing as an operator-angel since 2014, & now with enough data from my own experience, can confirm that 1-2 companies will end up driving a majority of my returns. The countless hours I have spent turning over stones, meeting hundreds of founders & working in the trenches with portcos, translate to just a couple of needle-moving outcomes over a decade. But yes, they are expected to move the needle by a lot (major step-functions, as I like to call them).
Same with content – sometimes I feel like I have written the most thoughtful post or a super-smart tweet, & no one reads it. And then, I write some crazy anecdote from my past lives & it goes viral.
Translating this “only need to get a few right” idea from purely academic to a lived & internalized one becomes important as it helps to frame risk-taking in the right way, particularly dealing with failure.
It has taught me many lessons:
Outcomes in creative & high-risk-high-reward pursuits are random.
Multiple failures don’t matter (& should be expected), as long as the few successes are outlandishly large.
Given success is sporadic, need enough shots at the goal to get odds in your favor. Take more chances with asymmetric upsides.
Given success is intermittent, plan for & evaluate things over a long-enough timeline. Patience is key!
When you get it right, let it compound. Milk every success to the fullest.
While specific outcomes are uncontrollable, a few decisions will always be make-or-break points in life – where you study, who you marry, which city you decide to settle down in, whether you have kids or how many, what house you buy & when etc. When faced with these questions, appreciate their importance, take your time & try to make the best possible decision in your capacity.
Finally, rather than getting fixated on episodic successes & failures, zoom out to look at the bigger picture & visualize your life as a curve. The goal is to have it trending up & to the right over a long timeline.
So, keep playing the game, be patient & wait until you get your “few” right!
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I recently tweeted a really interesting insight I heard from Mike Maples, Jr of Floodgate at a recent Draper University closed-door event:
This is so true, and a common mistake that founders & product leaders make while building new products. Looking back on my own startup, while I rigorously tried to execute Paul Graham’s “Do things that don’t scale” philosophy, I still created unreasonable expectations in my own head around user growth for each MVP iteration. This was probably due to the baggage I was carrying from my previous experience of working at large companies like Alibaba, where numbers were talked about in Millions & sometimes, Billions.
When the absolute user numbers weren’t met, my morale as a founder would get hit with each iteration. In hindsight, hitting numbers shouldn’t have been the goal at all. The ideal 0-to-1 mindset is like that of a scientist, with curiosity being the core driving emotion, backed by an iterative product development approach. The target outcome of this approach should be to gather insights that help refine the hypothesis.
Similar to how scientists drive their research process one experiment at a time, I have realized that building any new product or service from grounds-up requires moving one “unit” at a time. It’s up to you to decide what that unit should be – acquisition, activation, frequency of use, revenue or even just getting qualitative feedback!
In a scientific process, more than just the number of experiments run, what’s important is taking the learning from each experiment & applying it to the next one so it becomes better than the first.
Similarly, a good approach to building anything new is to delight one person at a time. This automatically focuses the building process & anchors it on an actual customer, thus making it easier to ship something that solves a monetizable problem for someone in the real world. Trust me, this is a non-trivial hurdle that many startup teams are unable to cross.
The 0-to-1 stage can be highly fuzzy but breaking it down into one unit at a time helps give more clarity to the team around the exact short-term goals.
The most profitable way for a product to grow is via word-of-mouth. The above approach naturally optimizes for it. And once the testimonials & organic growth start kicking in, traction compounds with minimal incremental effort.
Of course, the key to executing this building approach well is patience. Again, think of a scientist. A larger research budget or more headcount can’t necessarily speed up a breakthrough. Similarly, building one unit at a time requires a small team committed to iterating over a long enough timeline for customer compounding to kick in. A lean & capital-efficient operating model is a requirement of this approach as a long runway significantly improves the odds of success.
Learning from my mistakes as a founder, as I have now started working towards regularly putting useful startup & investing content out there, I am consciously following the approach of publishing & learning one unit of content at a time – blog post, Twitter thread, LinkedIn post etc.
Same for my angel investing, wherein I am trying to help each founder, co-investor & startup employee I meet, one week at a time, with whatever resources I have – network, expertise, capital etc.
This approach is helping me to first put the core enablers of my venture investing craft in place that then, hopefully, self-compound. Therefore, I feel much better this time about hitting my long-term goals.
Also, in case you are interested in other similar startup insights shared by Mike Maples at the DraperU event I referred to earlier, check out my Twitter thread on it.
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